Ambani bros at loggerheads over Reliance sale

16 Jun 2008

According to the Financial Times, India’s billionaire Ambani brothers are fighting over the proposed takeover of mobile operator Reliance Communications (RCOM) by South Africa’s MTN. Brother number one, Mukesh Ambani, through his group Reliance Industries, last week threatened to block the planned combination by claiming a right of first refusal over RCOM, the flagship of his younger sibling Anil Ambani. He has also threatened to sue MTN and RCOM for damages if the deal goes ahead. Anil Ambani’s group yesterday responded with legal threats of its own. ‘If Reliance Industries chooses to take any legal action, the same will be vigorously defended by Reliance Communications and Reliance Communications will claim costs and damages from Reliance Industries,’ the company said.

The brothers have been bitter rivals since the death of their father, Indian industrialist Dhirubhai Ambani, in 2002. They divided their father’s empire between them in 2005 and have since each become successful in their own right, with Mukesh ranking fifth on the Forbes rich list with a fortune of USD43 billion and Anil, just USD1 billion short of him, in sixth place. At stake in the latest dispute is a deal that would create a sprawling international mobile operator with 115 million subscribers spanning Africa, the Middle East and India. Anil Ambani is seeking to engineer a de facto reverse takeover between RCOM and MTN, under which he will swap most of his 66% stake in the Indian company for a 34.9% stake in the combined entity.

The deal had seemed to be progressing smoothly, with an agreement expected in early July, when Reliance Industries last week suddenly wrote to MTN claiming the right of first refusal over any transfer of RCOM shares by Anil Ambani. ‘We shall adopt legal proceedings against them [the Anil Ambani group] to enforce our rights, which shall be in the Honorable Bombay High Court, in which we shall necessarily add MTN as one of the defendants,’ the letter warned.

India, South Africa, MTN Group, Reliance Communications (RCOM)