Bharti Airtel Zain Acquisition

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Bharti airtel – zain acquisition
Umesh
Word count: 3437 words
Bharti airtel – zain acquisition
Umesh
Word count: 3437 words
Global Business
Global Business
sheffield hallam university | B1051892
sheffield hallam university | B1051892
2013
2013

Bharti Airtel-Zain Africa Deal

Background of the Acquirer (Bharti Airtel) and Acquiree (Zain Africa)

After a prolonged wait, finally, Bharti Airtel’s much awaited African Safari did start by acquiring Zain Africa. Mr Sunil Mittal and other experts believed that next telecom revolution would take place in a developing economy and that developing economy would be Africa. Bharti Airtel was determined to establish their presence in Africa and they were in negotiations with MTN Group Limited (Scaria, et al., 2010). However, after two rounds of strenuous negotiations, it did not succeed as Bharti Airtel believed that the structure presented by board of directors of MTN was completely unacceptable. But this did not stop Bharti Airtel’s ambition of moving in Africa they decided to select another Telecom African giant named Zain Africa. This time they made the offer so lucrative that Zain Africa could not deny (Mishra, et al., 2010). Mr Sunil Bharti Mittal, MD (Managing Director) of Bharti Airtel and Mr Asaad Al, Bhanwan, Chairman, Zain Group executed this acquisition on 30th March, 2010, at Netherlands making it second largest when compared to an Indian company. Bharti Airtel offered USD 10.7 million for this acquisition (First Call India Equity, 2010). Bharti Airtel Limited commonly known in India as Airtel, was an Indian Telecommunications services company, operating in 20 countries across South Asia, Africa and the Channel Islands. It was the world’s fourth largest mobile telecommunications company with over 261 million subscribers, as of August, 2012. It was the first Indian telecom service provider to achieve Cisco Gold certification. Mr Sunil Bharti Mittal was the Chairman and MD (Managing Director) of Bharti Airtel Limited (Anonymous, 2012). Zain Africa International BV, was a wholly owned subsidiary of Zain which was Kuwait’s first mobile operator, was started in Netherlands. It handled the operations of Zain in Africa. Initially, name of the company in Africa was Celtel, however Zain acquired it in 2005 and then it was renamed to the same name as that of the acquirer. It had around 42 million subscribers in Africa (Anonymous, 2012).

Following table shows the financial status of the both the companies individually and Figure 1.1: Bharti Airtel – Zain Financial Comparison (Scaria, et al., 2010) Figure 1.1: Bharti Airtel – Zain Financial Comparison (Scaria, et al., 2010) even when they are combined together:

Overview of the Deal
Figure 1.2: Overview of the entire deal (Mishra, et al., 2010) Figure 1.2: Overview of the entire deal (Mishra, et al., 2010)

Acquirer| Bharti Airtel Limited|
Acquiree| Zain Africa International BV|
Acquisition| Bharti Airtel Limited has acquired 100% of Zain Africa International BV and its business operations in Africa (except Morocco and Sudan)| Method of Acquisition| Security Sale (Share Security)|

Total value of Acquisition| USD 10.7 million|
Methods of Payment| Entire Cash deal: i. USD 9.00 billion to be paid in cash ii. USD 1.7 billion will be assumed as debt on the balance sheet of Zain| Source of funding| i. Bharti Airtel to borrow USD 7.5 million from a consortium of banks led by Standard Chartered Bank and Barclays Bank ii. Bharti Airtel to avail a rupee loan of USD 1 million equivalent from SBI Group.|

Structure of the Acquisition
Note: The fifteen different countries are as follows: 1) Ghana, 2) Sierra Leone, 3) Zambia, 4) Madagascar, 5) Gabon, 6) Burkina Faso, 7) Kenya, 8) Niger, 9) Democratic Republic of the Congo, 10) Malawi, 11) Nigeria, 12) Chad, 13) Tanzania, 14) Uganda and 15) Republic of the Congo (Money Control, 2010).

Motives and Objectives of the Acquisition...
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