Norwegian incumbent Telenor has vowed to stop the merger of Naguib Sawiris’ formerly Weather Investments (now known as Wind Telecom) and Vimpelcom, whose board approved the deal on January 16.
Six out of the nine directors – three from Russian telecoms…
Norwegian incumbent Telenor has vowed to stop the merger of Naguib Sawiris’ formerly Weather Investments (now known as Wind Telecom) and Vimpelcom, whose board approved the deal on January 16.
Six out of the nine directors – three from Russian telecoms investor Altimo and three independent representatives – on Vimpelcom’s board voted in favour of the acquisition.
VimpelCom also announced yesterday that it had obtained commitments of up to US$6.5bn from Russian and international banks. It said that it expected to draw down approximated US$5bn to finance a cash portion of transaction and to re-finance the Orascom Telecom debt, which will be due when the acquisition goes through.
The three directors representing Telenor, which holds a 39.6% stake in Vimpelcom, voted against the acquisition, but lost the decision.
Vimpelcom released a statement today confirming that its board had approved the acquisition, while Telenor stated: “We did not support the original proposal because it did not make strategic or financial sense. The revised proposal makes even less sense as the consideration now being offered is even more generous to the owners of Wind Telecom. Existing VimpelCom shareholders face considerable additional dilution if this acquisition is completed on the terms approved by the board.
It said that after the transaction was completed, Vimpelcom would own (through Wind Telecom) 51.7% of Orascom Telecom Holding and all of Wind Telecomunicazioni.
The deal would create the sixth largest telecommunications carrier by subscribers in the world.
It said that the under the terms of the transaction, Wind Telecom shareholders will contribute their shares in Wind Telecom in exchange for consideration consisting of 325,639,827 newly-issued Vimpelcom common shares, 305,000,000 Vimpelcom convertible preferred shares and US$1.495bn in cash.
Telenor had previously raised concerns about the acquisition in December, when a spokesman said that “we do not believe that this transaction makes strategic or financial sense for Vimpelcom’s shareholders”.
Now, Telenor said that while Wind Telecom would get a 20% economic stake in Vimpelcom, its voting stake would be 30.6%. At the same time, the voting stake of Telenor and Vimpelcom’s minority shareholders could be diluted.
Telenor said that in December it had informed Vimpelcom that it would not waive its pre-emptive rights under the company’s shareholder agreement in order to stop a dilution of its stake.
Up to that time, the transaction was seen as an “unrelated M&A transaction”, which granted both Telenor and Altimo pre-emption rights.
But according to the Telenor statement, Altimo told Vimpelcom on January 10 that companies controlled by Gleb Fetisov, an indirect minority shareholder in Altimo, had acquired a 0.7% stake in Orascom Telecom Holding, in which Wind Telecom also had a 51% stake.
According to Telenor, Altimo claimed that this changed the transaction into a “related party M&A transaction”, which would mean that Telenor was deprived of its pre-emptive rights.
A Telenor spokesperson sharply criticised these tactics.
He said: “We see this as an obvious deception that violates the VimpelCom shareholders agreement. It is an artificial construct aimed at depriving Telenor of its pre-emptive rights and we will defend our rights in order to protect Telenor’s and the Vimpelcom minority shareholders’ investment in Vimpelcom.”
He said that at the forthcoming shareholders meeting, Telenor would vote against the issuance of the new shares to the owners of Wind Telecom.
In its statement, Vimpelcom also said that it had entered into a value-sharing arrangement with Wind Telecom over the Orascom’s Algerian subsidiary, OTA.
This means that it will share any financial profits or losses from the sale of OTA to the Algerian government.
The government has been attempting to nationalise OTA. Orascom’s present owner, Naguib Sawiris, has been in dispute with the authorities, after they demanded him to pay US$600m in fines and back taxes.
