South African telecom major MTN Group is considering issuing as much as 20 per cent fresh equity to Anil Ambani-controlled Reliance Communications (RCom) as part of a multi-stage merger deal.
The fresh equity will have special voting rights helping Ambani gain greater control over the company.
The deal will help Ambani own up to 34.99 per cent stake in MTN to avoid a tender offer under South African rules. It will also enable one of the MTN promoters to buy stake in RCom as part of the reverse merger process.
Sources familiar with the developments said one of the MTN promoter families is looking at selling 9 per cent to RCom in exchange for a similar stake in the latter.
When contacted, an MTN spokesperson Nozipho January-Bardill declined to comment on the development. An RCom spokesperson also reserved his comments.
A 34.99 per cent stake will make Ambani the largest shareholder in MTN.
Lombard Odier Darier Hentsch & Cie, promoted by Lebanon's former prime minister Najib Mikati, holds 9.82 per cent, Newshelf 664 (Proprietary) Ltd holds 13.06 per cent and directors and subsidiaries hold 0.03 per cent. The public and financial institutions hold the rest.
RCom's shares were up 12.5 per cent to Rs 438.20 on the Bombay Stock Exchange today.
RCom's share price has fallen 19.33 per cent since May 26, when the company signed a cautionary agreement to acquire stake in MTN.
RCom is also believed to be restructuring the deal in a way that the right of first refusal, as mentioned by Reliance Industries in a recent letter, is not invoked. The right of first refusal no longer applies if RCom's promoters maintain a majority stake in the company.
The sources also said RCom has sought an additional three weeks' time for exclusive talks and completion of due diligence. The earlier agreed 45-day exclusivity talk period ends on July 8.