The Federal High Court of Nigeria said in a judgment on 24 January that the acquisition of a majority stake by India’s Bharti Airtel in Zain Nigeria (now known as Bharti Airtel Nigeria) in 2010 was “null and void”.
This is because Econet Wireless,…
The Federal High Court of Nigeria said in a judgment on 24 January that the acquisition of a majority stake by India’s Bharti Airtel in Zain Nigeria (now known as Bharti Airtel Nigeria) in 2010 was “null and void”.
This is because Econet Wireless, originally a 5% shareholder in Zain Nigeria (then known as Econet Wireless Nigeria), has allegedly not been notified of this transaction, as well as of other share transfers and sales since 2003.
On 30 January 2012, Strive Masiyiwa, the chairman of Econet Wireless, stated: “In October 2003, Econet Wireless received a letter from the chairman of [Econet Nigeria], Mr Oba Otudeko, in which he advised that at a board meeting directors had decided that Econet Wireless was no longer a shareholder, Econet’s share certificate had been cancelled, and Econet’s name removed from the shareholder register.
“The motive for this unprecedented action was the circumvention of Econet Wireless’ rights as a shareholder in order to facilitate the sale of shares, first to Celtel International, and later to Bharti Airtel.”
In 2006, Kuwait-based Zain Group bought the African operations of Celtel International. It sold them, five years later, to Bharti Airtel. These transactions, as well as other deals that have seen Econet Nigeria change hands since 2003, have been contested by Econet Wireless.
On its website, Econet Wireless summarised the 24 January court decision: “Econet Wireless [EWL] is a shareholder of Bharti Airtel Nigeria and holds 5% of the issued shares of the company. The court ordered Airtel to reinstate the shareholding of EWL.
“The court ordered that all actions and resolutions taken by the company since October 2003, at which EWL was entitled to be notified and to participate in as a shareholder but was prohibited, are null and void. This includes decisions to sell shares, issue shares, and also transfer shares to third parties.”
Following that decision, Bharti Airtel Nigeria filed an appeal against the judgement as well as an application for a stay of execution, according to court documents disclosed by Econet on its website.
Bharti Airtel could not be reached for comment before the press deadline. But according to Reuters citing industry sources, Airtel Nigeria will not be immediately threatened by this judgement because it had been indemnified against potential legal issues when it bought the assets from Zain, and also because of Econet’s small stake in the original Airtel Nigeria.
In its 2010-2011 annual report, Bharti Airtel had also written: “Under the transaction to acquire a 65.7% controlling stake in Airtel Networks [Airtel Nigeria] in 2006, its shareholders were obliged under the pre-emption right provision contained in the shareholders agreement to first offer the shares to each other before offering the shares to a third party. The sellers waived the pre-emption rights amongst themselves and the shares were offered to EWL [Econet Wireless] despite the fact that EWL’s status as a shareholder itself was in dispute.
“However, the offer to EWL lapsed since EWL did not meet its payment obligations to pay for the shares within the 30 days deadline as specified in the shareholders agreement and the shares were acquired by Zain Africa, which was subsequently acquired by an international subsidiary of [Bharti Airtel]. EWL has filed a number of suits before courts in Nigeria and commenced arbitral proceedings in Nigeria contesting the acquisition. [Bharti Airtel]’s indirect subsidiary that is the current owner of 65.7% of the equity in Airtel Networks has been defending these cases vigorously and Management believes that it has meritorious defences.”
