Reliance Feud Kills MTN Deal

India's Reliance Communications Ltd. (RCom) and African operator Mobile Telephone Networks (MTN) have walked away from M&A talks "owing to certain legal and regulatory issues," namely an ongoing feud between Reliance chairman Anil Ambani and his brother Mukesh Ambani, chairman of Reliance Industries. (See Reliance, MTN End Talks.)

Reliance Industries inserted itself into the talks in mid-June claiming it has the right of first refusal on a majority stake in the Indian telco. (See Reliance Family Feud Messes With MTN Merger.)

Last week it initiated arbitration proceedings against Reliance Communications to block the potential merger, succeeding in chasing MTN off the exclusive negotiations that were due to expire on Monday. The companies had already extended the negotiation period as Reliance Communications tried to find a way around the challenge. (See MTN Extends Talks Amid Reliance Feud.)

The feud between the brothers looks to be far from over, however. Reliance Communications fired off a letter to Reliance Industries over the weekend warning it "reserves the right to claim direct and consequential damages" for its role in the collapse of the merger, adding, "Reliance Industries's actions were uncalled for, offensive and clearly motivated."

Shares in Reliance closed INR11.40 (2.62%) higher at INR446.60 on the Bombay Stock Exchange Monday, as certainty over the talks ended, while shares in MTN were trading down ZAR6.95 (5.33%) at ZAR123.35 on the Johannesburg exchange.

MTN hasn't been having much luck with Indian telcos -- it hooked up with Reliance on the rebound from an unsuccessful courtship with Bharti Airtel Ltd. (Mumbai: BHARTIARTL). (See MTN Becomes M&A Magnet.)

— Nicole Willing, Reporter, Light Reading