South Africa’s MTN and its shareholders can buy 36 per cent in Bharti Airtel via global depositary receipts (GDRs) without triggering a mandatory open offer, the Indian capital market regulator said. MTN and Bharti are in exclusive talks over a complex deal that could lead to a full merger, creating the world’s No 3 wireless group with more than 200 million subscribers and combined revenue of $20 billion.

Bharti had sought clarifications from the regulator on Indian takeover rules that require an acquirer of 15 per cent equity stake or more to make an open offer for another 20 per cent from other shareholders.

“MTN and/or its shareholders would be required to comply with the requirements of (open offer) only upon conversion of the GDRs into equity shares with voting rights,” the Securities and Exchange Board of India (Sebi) said. A New Delhi-based fund manager said the clarification removed uncertainty and would help the companies reach a deal.

“Good for Bharti. Better for MTN. Quite a breather for them, otherwise they would have to cough up more money for the open offer,” said R K Gupta, managing director at Taurus Asset Management. “It has to be seen how long MTN and its shareholders would like to continue with GDRs. They don’t get voting rights. I think this is a development which needs to be watched,” he said.

The Sebi letter, which was dated June 22 but made public on Tuesday, also said Bharti had proposed to acquire a 49 percent holding in the South African firm directly or through its affiliates.

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