Sibling rivalry spurs Anil Ambani to merge his firm with MTN: WSJ

May 30th, 2008 - 8:57 pm ICT by admin  

New York, May 30 (IANS) Anil Ambani’s interest in merging his Reliance Communications with South African cellphone operator MTN Group is spurred by his fierce business rivalry with his older brother Mukesh, The Wall Street Journal wrote here Friday. The proposed merger will give Anil first bragging rights to a major international deal in the latest round of him and Mukesh vying to outdo each other since their father’s death left them in control of one of India’s biggest companies, the WSJ said.

For the deal Anil may have to swap all or part of his 66 percent stake in his company for a big stake in MTN, making him the largest shareholder in a telecommunications empire with more than 100 million subscribers in Asia, the Middle East and Africa.

He wants to work with MTN to expand into markets outside India. The combination would make both companies more efficient and give them the firepower to expand at the brisk rate Anil prefers, people familiar with his thinking say, reported the Journal.

The world’s foremost business daily noted that the rivalry between the Ambani brothers has helped make each of them among the world’s richest men — and triggered the split of the company they inherited.

The MTN deal is, however, risky and may never happen, the paper said. But it is the latest bold step in Anil’s career as a dealmaker. A creative negotiator, he told his executives that they need to find a way to join forces that would work for MTN, which has entered discussions with various companies including Sunil Mittal’s Bharti, but never closed a deal.

“Let’s try to understand what MTN is looking for and craft a solution that meets their objections. We need to find some different approach that will make them want to deal with us,” Anil said, according to one executive as quoted by the Journal.

Reliance Communications - market value under $30 billion — and MTN - valued at $40 billion -have agreed to 45 days of exclusive talks. If the deal happens, Anil would be the largest shareholder in the combined company and would continue to run the business in India.

Giving the background to Ambani brothers’ rivalry, the Journal compared it to a family soap opera. After their father Dhirubhai Ambani’s death in 2002 without a will, Mukesh Ambani, now 51, assumed control of most of the Reliance group companies’ boards as well as the family’s 40 percent plus holding in the flagship, Reliance Industries Ltd.

While Anil and Mukesh appeared to work well together earlier to build the family business, with Dhirubhai gone, their differing personalities and Mukesh’s position as chief custodian of the family business soured their relationship.

Mukesh, the more sombre of the two, agreed to an arranged marriage, and has been the builder, spearheading the construction of Reliance’s massive refining and telecommunications projects.

Anil, 48, has been the deal maker, a polished interlocutor with foreign investors. Married to a former film star, he appears in the society pages of Indian newspapers with his Bollywood friends, the Journal said.

In 2004, Anil took his battle with Mukesh public. He accused Reliance of everything from ignoring shareholders to financial irregularities. He and directors loyal to him offered to resign from the boards of some Reliance companies. Mukesh eventually relinquished control of close to 30 percent of the group, which Anil spun into his own group.

The two brothers to this day rarely talk, people close to them say, even though they share an 18-storey mansion in south Mumbai, the Journal said.

Reliance Communications became the flagship of Anil’s interests, now assembled under Reliance Anil Dhirubhai Ambani (ADA) Group. The group includes finance company Reliance Capital and power company Reliance Infrastructure. Anil’s majority stakes in most of these companies give him a net worth close to $40 billion.

In the last fiscal, the market capitalisation of the Reliance ADA Group of companies more than doubled, while shares in Mukesh’s Reliance Industries and its related companies rose 79 percent. Anil’s companies now have a market value of about two-thirds of those run by Mukesh, the Journal calculated.

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