Rival suitors for Tele2 Russia are pushing ahead with bids despite its Swedish parent insisting it is committed to a deal with VTB Group.
Stockholm-based Tele2 issued a statement from its board of directors today seeking to clarify that its agreement to…
Rival suitors for Tele2 Russia are pushing ahead with bids despite its Swedish parent insisting it is committed to a deal with VTB Group.
Stockholm-based Tele2 issued a statement from its board of directors today seeking to clarify that its agreement to sell the Russian business to VTB Group, the investment arm of Russia’s VTB banking group, in a deal worth US$3.55bn is “definitive” and “legally binding”. It is, however, still subject to regulatory approvals. The transaction, comprising US$2.4bn in equity and US$1.15bn in debt, represents an EBITDA multiple of 4.9x based on FY 2012 results.
In its statement today, the Tele2 board said the terms of the transaction, expected to be completed shortly, include provisions which entitle it, within 12 months of closing, to half the net cash profits VTB obtains from a potential re-sale of the Russian business.
The board also stressed that they have considered “all strategic options available” for Tele2 Russia.
“The board of directors’ decision to enter into this transaction was based on its experience in owning and successfully developing Tele2 Russia over many years,” they said.
Suitors plan to proceed with offers
Last Thursday, the day after Tele2 announced the deal, Alfa Group’s A1 and then MTS in partnership with VimpelCom, in which Alfa Group is the largest shareholder via its telecoms arm Altimo, declared they were ready to make higher offers for the Russian business. All have since stressed they intend to press ahead with bids, despite Tele2’s fixed stance.
In a strongly-worded statement, A1, an investment arm of Russian businessman Mikhail Fridman’s Alfa Group, said last week it was prepared to offer US$3.6bn to US$4bn for Tele2 Russia in cash. A1 argued the deal with VTB does not represent the best value for shareholders in Tele2 and its largest shareholder Investment AB Kinnevik, falling short of Tele2 Russia’s market value. The company also contended it had made “significantly higher” offers for the Russian unit last year which were rejected by the Swedish parent’s advisers Morgan Stanley without “reasonable explanation or discussion”.
Later that day, Russian operators MTS and VimpelCom announced they had submitted a joint letter to Tele2 chairman Mike Parton and president and CEO Mats Granryd expressing their interest in acquiring the Russian unit for US$4bn to US$4.5bn, including US$1.15bn of debt. Like A1, the NYSE-listed companies said they were ready to enter into negotiations with the aim of concluding a transaction within a short timeframe.
MTS and VimpelCom also said their attempts to meet with Tele2’s financial advisers or management had failed.
Today, spokespeople for both MTS and VimpelCom confirmed their companies’ intentions to proceed with their joint offer.
MTS and VimpelCom have made an offer that is financially superior, representing a premium of up to 30% of the VTB offer,” the MTS spokesperson said, adding that the companies are still awaiting a response from Tele2’s leadership regarding their offer.
The VimpelCom spokesperson reiterated the companies’ contention that they believe they can make a higher offer for the benefit of Tele2 shareholders, noting that they will inform the markets if and when they take further steps.
Meanwhile, Reuters quoted A1 managing director Dmitry Vozianov on Friday as saying the firm’s lawyers are considering filing a lawsuit in connection with the matter. Vozianov also said A1 is in talks with Tele2 minority shareholders, noting that they could make a legal claim for incurred losses. However, he declined to elaborate on the talks with shareholders, saying they are confidential.
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 last week, 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.
