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Mergers & acquisitions

MTN Extends Talks Amid Reliance Feud

India's Reliance Communications Ltd. (RCom) and African mobile operator Mobile Telephone Networks (MTN) have extended their merger talks by two weeks as they try to thrash out a deal and avoid legal action from Reliance chairman Anil Ambani's brother. (See MTN Extends M&A Deadline.)

Back on May 26, Reliance and MTN announced they had entered exclusive talks for a 45-day period, after discussions between MTN and Bharti Airtel Ltd. (Mumbai: BHARTIARTL) fell through. (See Reliance, MTN in Talks and Bharti Exits MTN Talks.)

Now that timeslot has had to be extended. In a filing with the Johannesburg Securities Exchange today, MTN notes: "MTN has agreed to continue its negotiations with Reliance... and has extended the period of exclusivity until 21 July 2008. There is no certainty that these discussions will result in a transaction."

That extension is needed because the prospect of a stock swap merger deal between the two operators has met some significant resistance. Reliance Industries, headed by Anil's brother Mukesh Ambani, claims that an agreement signed when the Reliance empire was split gives it first rights to acquire a majority of Reliance Communication shares. (See Reliance Family Feud Messes With MTN Merger.)

In the latest salvo fired between the siblings, Reliance Communications refused to meet with Reliance Industries Monday, prompting Mukesh Ambani's empire to issue the following statement: "In view of the refusal of RCOM to participate in conciliation process as envisaged in the agreement, RIL is left with no alternative but to adopt appropriate proceedings against RCOM as advised."

Since Reliance Communications disputes the validity of the agreement, it refuses to participate in an arbitration process. Instead, it has suggested a meeting on July 14, a week before the MTN extension is up, to clarify its position with Reliance Industries.

But the issue of majority stock ownership might be avoided. Reports suggest Reliance Communications is offering to acquire a 51 percent stake in MTN for a combination of cash and stock. (See Reliance, MTN Update.)

Reliance Communications's stock closed 6.15 percent higher at INR440.95 (US$10.18) on the Bombay Stock Exchange following news of the extension. Shares in MTN were 0.21 percent higher at ZAR128.49 ($16.54) on the Johannesburg exchange.

— Nicole Willing, Reporter, Light Reading

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