Russia-focussed telco VimpelCom has agreed to sell a 51% stake in Orascom Telecom Algerie (Djezzy) to Algeria’s sovereign wealth fund for US$2.643bn, ending its long-running dispute with the Algerian government.
VimpelCom will keep operational control…
Russia-focussed telco VimpelCom has agreed to sell a 51% stake in Orascom Telecom Algerie (Djezzy) to Algeria’s sovereign wealth fund for US$2.643bn, ending its long-running dispute with the Algerian government.
VimpelCom will keep operational control of Djezzy even though its stake will be reduced to 49% after closing. It will also continue to consolidate the Algerian telco.
As part of the transaction, Djezzy will pay a US$1.86bn dividend to VimpelCom’s Cairo-based subsidiary Global Telecom Holding (GTH), which will receive a total US$4bn at closing, expected to take place before the end of the year. All proceeds will be used to pay down outstanding shareholder loans provided by VimpelCom, which is working to cut its US$27.5bn debt pile.
VimpelCom CEO Jo Lunder described the agreement and settlement as a successful outcome for all stakeholders.
“For GTH and Djezzy, it resolves our dispute in Algeria and allows us to solidify our strong leadership position in Algeria by enabling us to further invest in a high-speed 3G network to take full advantage of the potential for mobile data growth in the country. We look forward to working with our new partner [Algerian National Investment Fund (FNI)] to drive the business forward and create significant long-term value for all of our stakeholders in line with our strategic value agenda.”
Before closing, Djezzy will transfer its operations to wholly-owned subsidiary Optimum Telecom Algerie which, in turn, will establish a credit facility of up to AD82bn (US$1bn) with a syndicate of local banks.
The parties have agreed not to transfer their shareholdings in Djezzy for seven years after closing other than to certain affiliates. GTH and FNI will each have a put and call option at fair market value on GTH’s Djezzy shares on the seventh anniversary of closing and at specified other times.
Amsterdam-based VimpelCom acquired its majority stake in Djezzy via GTH in 2010 as part of a US$6bn deal. However, before the deal closed, Algeria announced plans to nationalise Djezzy after a dispute with GTH (then known as Orascom Telecom Holdings) over taxes and fines. In 2012, VimpelCom said it would sell its stake to Algeria subject to agreement on price but, until now, nothing had been decided.
Disputes resolved
The sale agreement will also see the parties resolve their tax and fine-related disputes, with VimpelCom and GTH both taking a US$2bn charge in their 2013 financial statements.
The Bank of Algeria will lift foreign exchange and import restrictions on Djezzy at closing after the Algerian operator pays an AD99bn (US$1.3bn) fine.
The parties have also agreed to settle arbitration proceedings.
