African Safari

DIFFERENCE BETWEEN MERGER AND ACQUISITION

When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.
In the pure sense of the term, a merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated

MOTIVES BEHIND MERGER AND ACQUISITION

Increased

revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power (by capturing increased market share) to set prices.
Economy

of scale: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations

Synergy
For

example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.
Taxation:

A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability.

About Bharti Airtel

Bharti Airtel is Asias leading integrated telecom services providers with operations in India, Sri Lanka and Bangladesh.

The Company is divided into 4 business units that are: 1. Mobile 2. Telemedia (Broadband, IPTV and Telephone services) 3. Enterprise (End-to-End telecom solutions) 4. Digital TV (Direct-to-Home TV)

Sunil Bharti Mittal is the Chairman & Managing Director of Bharti Airtel Ltd. head quartered at New Delhi, India.

What is the Deal?

Bharti Airtel has made an offer to buy the African Asset of Kuwaits Zain Telecom for $10.7 Billion. Zain board has approved the offer. This deal will fire Bhartis global ambitions and will catapult it to become the worlds seventh largest mobile phone company by subscribers.

Contd..

The combined subscriber base of Bharti and Zains African Assets will be 164 million. Financially, the market value of the combined entity will be just under $42 billion, with annual revenues of more than $12 billion and profits nearly $2 billion. Cash and assets will be under $3 billion.

Bharti Airtel Hits

Indias largest telecom firm, Bharti Airtel Ltd, has affirmed its ambitions to expand beyond India by buying a 70% stake in Bangladeshs fourth largest telecom firm, Warid Telecom International Ltd. REASONS Declining revenue per subscriber has forced Bharti Airtel to look for firms in overseas markets with higher average returns. Last year, it tried to buy South Africas MTN Group Ltd, but failed.

AMOUNT OF INVESTMENT MADE

Bharti will initially invest $300 million (Rs1,362 crore) in Warid to expand its operations. The firm will gain control of Warids board and daily operations, while current owners, the Dhabi Group, will hold the remaining 30% stake

Recent Scenario

Legal dispute over Zain Nigeria threatens to disrupt BhartiZain deal.

Funding Mechanics

Conclusion

This deal opens up opportunities for Bharti Airtel in African telecom market and puts it in direct competition with MTN.