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Indian laws blocking M&As: Moily
September, 21st 2009

The government has admitted that the laws of the land are coming in the way of expansion of businesses.Asked whether Indian laws were stalling the proposed merger between the country's leading telecom service provider Bharti Airtel and South African telco MTN, Union law minister M Veerappa Moily told DNA Money on Saturday, "That is true".

The minister, however, clarified that his opinion does not pertain to the specific case of Bharti-MTN but to the larger issue of corporate expansion.

"We should not stop expansion of companies," because of this, Moily said. Asked if the government was looking at options to resolve the legal tangle in the case of the proposed merger between Bharti and MTN, Moily said, "This specific case has not come to my ministry."

MTN and South African authorities are believed to be insisting on dual-listing before progressing further on merger talks, which could result in a cross-border deal worth over $23 billion.

At present, India does not allow dual listing of companies. Bharti and MTN are in exclusive talks for a merger till September 30.Dual listing is where a company's shares are listed both in an Indian and a foreign stock exchange. Allowing dual listing would mean investors can buy shares in one country and sell in the other.

Without full rupee convertibility or the so-called capital account convertibility, dual listing is difficult to achieve, according to finance ministry sources. But PricewaterhouseCoopers (PwC) executive director Amrish Shah, who looks after mergers and acquisitions, said there are two dual-listing options for the merged Bharti-MTN.

"One is the traditional way -- listing the entity on an Indian stock exchange as well as in Johannesburg, so that shares can bought in one country and sold in another. But, this would imply several changes in the Indian law," Shah said.

The second option, which he believes would be more feasible, is, "Each company could be listed in its own country and agree on a contractual arrangement. This would allow distribution of economic benefits to both the companies, as if they are one entity. The second option would require minimal changes in the law."

Mining giant Rio Tinto, is one such company to have opted for the second category of dual listing. Meanwhile, Prime minister Manmohan Singh is expected to meet South African president Jacob Zuma during the upcoming G-20 summit (September 24-25) in Pittsburgh, US. deal may well be discussed there, as Zuma said last week that Indian laws were stalling the proposed merger between the two telcos.

"I'm told there are hitches in terms of the law, particularly on the Indian side," Zuma had told reporters in Cape Town last week. Interestingly, Bharti group chairman Sunil Mittal had met the prime minister recently, perhaps to discuss the MTN issue. Earlier, finance minister Pranab Mukherjee had also commented on dual listing, in relation to the proposed merger deal.

Both Mittal and MTN CEO Phuthuma Nhleko had met Mukherjee last month. Mukherjee said the issue of dual listing would be examined, but finance ministry officials indicated that it could not be allowed in a hurry to suit a particular entity.

Corporate affairs minister Salman Khursheed said the finance ministry and the Securities Exchange Board of India would have to first deliberate on dual listing of companies, after which the issue would come to his ministry. Currently, top bosses of Bharti are learnt to be in South Africa to discuss the proposed merger.

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