Singapore Telecommunications (Singtel) will be selling 198 million shares it owns in Bharti Airtel to Bharti Telecom for a consideration of $2.25 billion.
The telco’s indirect wholly-owned subsidiaries Pastel Limited and Viridian Limited entered into a share purchase agreement (SPA) with Bharti Telecom on Aug 25.
The shares represent approximately 3.3% of the total number of shares in Bharti Airtel.
The sale and transfer of the shares will be executed anytime before Nov 23, following which Singtel’s effective stake in Bharti Airtel will decrease to 29.7% from 31.4%.
The remaining stake of 29.7% is estimated to be worth $22 billion. It comprises a 19.2% indirect stake through Bharti Telecom and a direct stake of 10.5%.
According to Singtel, the sale, which will see an estimated $0.6 billion net gain on divestment for the telco, is part of the group’s capital recycling strategy.
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The sale will also follow a number of recent capital management initiatives to rebalance and optimise Singtel’s associates portfolio, including an increase in stake in Intouch Holdings, the parent company of Singtel’s regional associate AIS, and a partial divestment of Airtel Africa.
"As long-term strategic investors and partners, the value of our stakes in our regional associates has risen substantially over the years but has not been properly reflected in our share price. This sale in Airtel will be our first ever and seeks to address this gap by illuminating the sizeable value of our holdings in Airtel,” says Arthur Lang, Singtel’s group chief financial officer (CFO).
“It is also part of our capital management approach to take monetisation opportunities that allow us to increase our return on invested capital and enhance total shareholder returns,” he adds. “With this transaction, we will raise over $2 billion which will help to fully meet the group’s needs for 5G and growth initiatives in the next few years, and put us in a strong position to grow our dividends in a sustainable way in line with our dividend policy.”
Sunil Mittal, chairman of Bharti Enterprises says, “Bharti Enterprises and Singtel have had two decades of an exceptional partnership based on mutual respect and trust. Over these years, Airtel has acquired a strong pan-India leadership position and also expanded to 16 countries in Africa and South Asia.”
“After this inter-se transaction, Bharti Telecom will remain the principal vehicle to hold controlling shares in Airtel. Bharti Enterprises and Singtel have agreed to work towards equalising their effective stake in Airtel over time. Bharti Enterprises looks forward to working with Singtel over the long term in taking Airtel to an even greater position of success,” he adds.
Further to his statement, Mittal says he expects Airtel to become a “significant contributor” to Singtel.
Bharti Enterprises will also remain “committed long-term investors” having invested approximately $1.3 billion in Airtel over the last three years.
Airtel, which is listed and traded on India’s Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Ltd (NSE), is a global communications provider with over 491 million customers in 17 countries across South Asia and Africa.
Shares in Singtel closed 1 cent lower or 0.38% down at $2.62 on Aug 24.
