Legal tussle threatens Airtel IPO

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For the second time in two years, Bharti Airtel is pushing again to float its Initial Public Offering (IPO) in June.

It did so in 2018, but, however, rained off the plan, for a number of reasons, which included a messy merger and acquisition snowballing into a huge legal crisis, and a preventive acquisition of the company’s share, to the tune of $6 million, in Uganda, and $6 million plus 10 percent annual interest in Congo, adding up to $9 million.

This obviously had raised concerns amongst investors.

Now Airtel is back again, seeking to raise $750 million on the London Stock Exchange, and then on the Nigerian Stock Exchange.

Analysts say the LSE has lately become a resort for low performers to seek capital in-flow from emerging markets. So the Bharti motivation for the IPO is not essentially about growth.

“The main motivation is the debt level at the parent company,” said John Davies, an analyst at Bloomberg Intelligence. The “rights issue, talk of selling towers plus this IPO are all consequences of that.”

The M&A crisis is still raging, as it has been since October 2009, when Bharti Airtel acquired the assets of Abu Dhabi Group-owned Warid Telecommunications in Uganda and Congo.

The acquisition was brokered by Wissam K. Fawaz known for facilitating such mega deals in the industry. He has supported Bharti with regard to the purchase of Warid Bangladesh.

For the Warid Uganda and Congo acquisition, Fawaz’s role was clearly documented and cut out:  he was to assist Bharti, especially its owner Sunni Mittal, to make contact with the selling party, the Abu Dhabi group led by Sheik  Nahayan bin Mubarak Al Nahayan.

Bharti was really excited to take over Warid Uganda and Warid Congo from the Warid Group Telecom. “However, Bharti found it difficult to get into contact with the Abu Dhabi Group and Nahayan himself,” the court papers the National Daily obtained stated in part.

And the commission for this, based on court records, was 2 percent of the deal, the enterprise value of Warid Uganda and Warid Congo, which added up to $500 million when the acquisition was wrapped up, according to the CEO magazine in 2013.

Then the hide and seek began as Bharti refused to play his own side of the game, forcing Fawaz, after efforts at utually settling the dispute failed,  to fly to law in order to claim his $3.7 million commission.

In the effort to claim his dues, Fawaz, through his counsel NIMMAKS Associates, had in 2015 approached the injunction judge of a court in the Netherlands where he was granted a pre-judgement seizure of over 7000 shares Bharti Airtel owned in the Airtel International of the Netherlands.

The values of the shares was $10 million then. But the seizure, according to a Nov 2017 court record entitled Minutes of Equities’ Precautionary Seizure, had no monetary gain. The telecom company itself declared no dividends that year.

But Fawaz sued Bharti Airtel in December 2017, in the High Court of Uganda, demanding his commission, interest since 2009, and cost of litigation. In January 2018, Bharti Airtel Limited was summoned to file its defence within 15 days upon receipt of the complaint.

While the matter of this breach of trust and contract is still in court, Bharti Airtel is readying its African subsidiary for the IPOs.

JP Morgan Securities Plc is the sole sponsor for the planned sale by Airtel Africa. BofA Merrill Lynch, Citigroup and JP Morgan are joint global coordinators and bookrunners.

 

 

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