Corporate News
Zain Africa sale raises stakes for India’s Bharti
In a deal announced in February, Bharti and Zain told their respective stock exchanges that they were in discussions until March 25. On the table were the African assets of Zain which comprise 15 countries. Photo/FREDRICK ONYANGO
Posted Wednesday, March 10 2010 at 00:00
According to the agreement, Bharti will assume $1.7 billion in debt and pay $700 million after one year.
This reduces the cash requirement to $8.3 billion.
Bharti has about $1.5 billion in cash on its balance sheet.
The amount of funding needed thus comes down to $6.8 billion.
Funding pattern
Although the funding pattern is yet to be worked out, the consensus view is that it will be entirely in debt.
“Equity is expensive in the current depressed share price valuations and cash can be borrowed at a relatively low cost,” says Bundeep Singh Rangar of IndusView. “Bharti is likely to borrow in short-term currency loans. These loans will be replaced with longer-term debt after the March 25 deadline.”
Mittal says his team is working out the details of various funding options.
“All I can say is that funding has never been an issue and will never be an issue for Bharti,” he told The Economic Times.
The Bharti-Zain deal is also likely to usher in a year of mergers and acquisitions for India Inc.
According to a report by international consultancy firm Grant Thornton, January saw Corporate India announce 56 M&A deals worth $2.5 billion.
Zain, if it goes through, will be the second biggest deal in Indian history after the $12 billion Tata takeover of Corus.
“I think we will see a perceptible increase in outbound mergers over the course of the year,” says Srivatsan Rajan, a partner at Bain. “This is primarily because assets in developed markets are available at valuations more reasonable than they were at the peak a couple of years ago..”
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