Russian billionaire Mikhail Fridman’s Alfa Group is ready to surpass a US$3.55bn offer by VTB Group for Tele2 Russia, saying it could pay up to US$4bn in cash for the company.
Yesterday [Wednesday, 27 March 2013] after market close Stockholm-based…
Russian billionaire Mikhail Fridman’s Alfa Group is ready to surpass a US$3.55bn offer by VTB Group for Tele2 Russia, saying it could pay up to US$4bn in cash for the company.
Yesterday [Wednesday, 27 March 2013] after market close Stockholm-based telco Tele2 announced plans to sell its Russian operations to VTB Group, the investment arm of Russia’s VTB banking group.
The transaction, comprising US$2.4bn in equity value and US$1.15bn in net debt, represents an EBITDA multiple of 4.9x based on FY 2012 results. Tele2 said it expected to complete the transaction “shortly”.
This morning Alfa Group’s investment arm A1 said it is could table US$3.6bn to US$4bn for the Russian operations of Sweden’s Tele2 group. A1 said it is “interested and willing” to agree to a purchase price over a very short time period.
A1 parent Alfa Group is VimpelCom’s largest shareholder via its telecoms investment arm Altimo, which owns 47.8% of VimpelCom’s voting shares. Alfa owner Mikhail Fridman recently sold his stake in Russian oil firm TNK-BP for US$14bn, giving him financial firepower for a bid for Tele2 Russia.
In its strongly worded statement A1 claimed the agreement with VTB would not represent the best value for shareholders and falls short of Tele2 Russia’s actual market value.
Talks last year
A1 said it held talks with Tele2 and shareholder Investment AB Kinnevik last year and made an offer for the Russian unit which it described as “significantly higher” than VTB’s. The investment firm said the offer was rejected by Tele2’s advisers Morgan Stanley “without reasonable explanation or discussion”, adding that subsequent attempts to re-negotiate were also thwarted. These included efforts by its own adviser, Rothschild, earlier this month to arrange follow-up meetings with Tele2 management.
A spokesperson for Tele2 said the company is 100% committed to its agreement with VTB, which is considers “a very good deal”. The spokesperson did not address A1’s claims about earlier discussions.
Rumours that Tele2 could exit Russia, where it has operated for 12 years, had previously also put Russian telcos MegaFon and Rostelecom in the frame for the assets. The rumours were fuelled by the fact Tele2 Russia was the only one of the nation’s five major mobile operators not to win a licence at last year’s 4G auction.
Tele2 Russia posted around SEK13bn (US$2bn) in net sales for 2012 and SEK 4.7bn (US$728m) in EBITDA. It had a customer base of approximately of 22.7 million at the end of 2012.
Commenting on the agreed deal with Tele2, VTB Group chairman Andrey Kostin said: “We believe that Tele2 Russia is a good financial investment which will be growing faster than the market.
“The company has a solid track record of growth and profitability in Russia, and a strong regional position as the 4th Russian mobile operator with almost 23 million subscribers. VTB plans to cooperate with financial and strategic partners in order to further develop its investment.”
Last November VTB acquired a majority stake in Bulgarian operator Vivacom in a consortium with Sofia-based Corporate Commercial Bank.
Tele2, which plans to use proceeds from the sale to buy back SEK12.5bn (US$1.92bn) worth of its own shares, said it wants to maintain its focus on Europe and Eurasia. Its core markets are Sweden, the Netherlands, Norway and Kazakhstan.
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