Until now it has been thought Ambani would limit himself to a 34.9 per cent stake in MTN, because if he went any higher he would be obliged under South African laws to make an offer to buy out the African company' other shareholders, The Finacial Times reported. But people close to the matter said Ambani was looking at the case for a "whitewash" procedure under which MTN's shareholders would vote on whether to waive their right to a tender offer. The Paper reported if the shareholders agreed, Ambani might end up owning 40-45 per cent of MTN, said one person close to the talks.
On May 26, Reliance and MTN began 45 days of exclusive talks on a possible merger that would create a telecom giant in emerging markets. Several transaction structures have been examined and no conclusions reached. Ambani is seeking to engineer a de facto takeover of MTN under which he would swap most of his 66 per cent shareholding in Reliance for a near-controlling stake in the enlarged group. Reliance would become a subsidiary of MTN.
The talks are politically sensitive because MTN is one of South Africa's most successful post-apartheid companies. Any deal with Reliance would almost certainly be presented as a merger. They have also been complicated by the threat of legal action by Mukesh Ambani, Anil's brother, who is claiming a right of first refusal over any stake sale by Reliance.