Sibling Rivalry May Scupper MTN Deal in South Africa

Mergers, Acquisitions and Financial Results

Sibling rivalry between the chairman of Reliance Communications, Anil Ambani, and his even richer and more powerful brother, Mukesh, may scupper a potential merger with MTN. The unseemly squabble is seeing Mukesh try to end a deal for Reliance Communications and MTN to engage in a share swap that would create a top-10 telecoms player.

Mukesh heads Reliance Industries, and claims his group has the first right of refusal on any shares that Reliance Communications sells. Mukesh has notified the two operators of its challenge to their merger.

Reliance Communications dismissed the industrial group's claim as "legally and factually untenable, baseless and misconceived ". But market analysts are not convinced -- particularly those in Asia already familiar with the bitter rivalry between two of the world's wealthiest men.

"I think this could derail the deal," one South African analyst said last week. Feedback from Asian clients showed the markets there were taking the legal threat more seriously than South Africans. The analyst questioned why MTN's advisers had not picked up on the issue of pre-emptive rights earlier -- unless they had seen the risk and did not believe it was a deal breaker.

"Some institutions have told me there are definitely some pre-emptive rights," he said. "There is a feeling that (Mukesh) would rather sink the deal than get involved. If you are fourth or fifth in the world in terms of wealth, and you are upstaging your bigger brother, it's not going to go down well."

MTN initially played down the feud at the weekend, with spokeswoman Nozipho January-Bardill telling Reuters: "As far as we are concerned nothing has changed." Last week she declined to comment on the brotherly battle -- which may imply that the status has changed after MTN took more time to assess the threat.

The brothers fell out when their father died intestate, leaving them to fight over his Reliance empire. The clash was resolved only when their mother stepped in to mediate. Anil took over telecoms, energy and financial services assets. Mukesh took the oil and petrochemical business to form Reliance Industries.

Mukesh is now India's richest man and fifth on the Forbes list of the world's wealthiest people, with $43bn. Anil ranks sixth with $42bn. The brothers rarely speak, and their feud has escalated into a court case over the price Anil's group must pay for gas in fields controlled by Mukesh.

Business Day