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China Mobile is in pole position to buy Millicom International Cellular after Dubai-based Investcom, the highest bidder for the emerging markets mobile phone group, on Tuesday agreed a surprise $5.5bn takeover from South Africa’s MTN.
Johannesburg-listed MTN is bidding $3.85 a share in cash and shares for Investcom – which is listed in Dubai and London – in one of corporate South Africa’s biggest offshore acquisitions.
The last-minute twist is a blow for Nasdaq-listed Millicom because China Mobile and other bidders have tabled offers well below the $5bn-plus offered by Investcom, which is controlled by the family of former Lebanese prime minister Najib Mikati.
Investcom Global Depositary Receipts, which are traded in London, jumped by 24 per cent to $18.75. Shares in MTN initially dropped more than 3 per cent but recovered to close slightly higher on the day at R60.25.
The collapse of Investcom’s bid for Millicom, which is controlled by Swedish telecoms group Kinnevik, could also cause losses for hedge funds that have bought stakes in the company since it put itself up for sale in January.
A purchase of Millicom – which has more than 9m subscribers in 16 countries in Asia, Africa and Latin America – would represent the biggest overseas acquisition by a Chinese state-owned telecoms group.
It would also fulfil Beijing’s desire to encourage national champions in strategic industries to expand abroad and compete with western rivals.
People close to the situation said that before yesterday’s news of Investcom’s takeover, China Mobile was braced for defeat after tabling an offer worth less than Millicom’s current market value of about $4.9bn.
The Chinese group, which was the second-highest bidder for Millicom, is believed to have justified the discount by arguing that the 80 per cent rise in Millicom’s share price this year had been driven by takeover speculation.
MTN’s bid for Investcom, which was announced yesterday, took even Millicom by surprise as it came only days before the group was about to begin detailed negotiations with the Dubai group.
“The first Millicom heard of this deal was when it was announced,” said a person close to the situation. But Azmi Mikati, Investcom chief executive, told the Financial Times that being bought by MTN was more attractive than buying Millicom. “We were looking at that acquisition and had put in a non-binding offer,” he said.
“We think this transaction makes much more sense for the shareholders of both companies.”
China Mobile and Millicom declined to comment on Tuesday.