As the 45-day exclusivity period for the merger talks between Reliance Communications and South African telecom major MTN ends today (July 8), the indications are that the talks may get derailed because of the legal obstacles raked up by Reliance Industries. London’s Financial Times has reported that “MTN is considering walking away from a tie-up with Reliance Communications” because of the spat between R-ADAG chairman Anil Ambani and his elder brother Mukesh Ambani which is not showing any signs of resolution.
Mukesh Ambani-led Reliance Industries has claimed the right to first refusal in case Reliance Communications shares are sold off to an external investor. This claim could be a stumbling block if the deal involves a reverse merger of RCOM with MTN with Anil Ambani becoming the largest shareholder of MTN which would in turn own RCOM. Reverse merger is one of the M&A options considered.
However, FT, quoting sources, said that MTN and Reliance may also extend their exclusive talks for another two to three weeks after the 45-day expires. That may only prolong talks while it’s not clear if that is sufficient to resolve the feud between the brothers.
In the meantime the conciliatory meeting called by Reliance Industries did not take place on Monday which has escalated matters even further with RIL invoking a 30-day conciliation period after which the matter will go into arbitration. RCOM on its part plans to go ahead with its proposed merger with MTN irrespective of RIL’s claim.
Apparently Anil Ambani’s representatives failed to turn up for a conciliatory meeting called by RIL in Mumbai on Monday. Thereafter, RIL decided to invoke the 30 day conciliation period starting July 7, after which the issue will go to arbitration.