India's RCom, MTN Group call off merger talks owing to 'legal issues'

India's Reliance Communications Ltd. (RCom) said it is unable to conclude its proposed $66 billion merger with South Africa's mobile operator MTN Group Ltd., 'owing to certain legal and regulatory issues'. RCom said the two parties have mutually decided to call off talks and allow the 'exclusivity agreement' to lapse. On May 26, Anil Ambani-controlled RCom entered exclusive talks to combine with MTN to build a telecoms giant that would reach from Asia to Africa to the Middle East with a market capitalisation of up to $70 billion. On July 9, both the companies decided to extend the period of exclusivity for their potential merger negotiations till July 21. Elder brother Mukesh Ambani-controlled Reliance Industries Ltd. (RIL) has been seeking to block the deal, claiming first right of refusal to buy a controlling stake in RCom, based on an agreement dated January 2006. RIL on Thursday issued a fourth letter threatening legal action against the deal, with Rcom saying the notice was 'legally and factually unwarranted'. Analysts say the market had already discounted the possibility of a deal when the exclusivity period was extended on July 9, with media reports speculating that MTN could not have taken bold steps, ignoring RIL. 'But now as the puzzle is over [whether] investors will be emboldened to re-enter the stocks at lower levels. RCom's stock will look up on its robust standalone performance,' said VVLN Shastri, country head of Firstcall India Equity Advisors. Gaurang Shah from brokerage Geojit Financial Services also expects a rise of about 4-5 percent in the RCom stock when the markets open Monday, as investors who were earlier spooked by the prospect of a possible litigation will now be relieved and turn to the scrip's strong fundamentals. MTN too said shareholders 'need not now be cautious when dealing in MTN securities.' Ahead of the announcement, RCom shares closed 4.14 percent higher at 435.20 rupees on the Bombay Stock Exchange, while the benchmark Sensex closed 3.99 percent up at 13,635.40. By Ms.Bobby Aanand, Metropolitan Jury.

"Loved reading this piece by Ms. Bobby Anand?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"

Join our Telegram group

Join our Whatsapp group