New operator formed by Vimpelcom-Kyivstar merger

Oct.05, 2009 in CY.TALK® News

OSLO, Oct 5 (Reuters) – Norway’s Telenor and Russia’s Alfa Group have agreed to end years of conflict and lawsuits with a merger of their mobile telecoms interests in Russia and Ukraine and the creation of a new U.S.-listed operator. Below are some facts about the new company:

* Russia’s second-biggest cellphone group OJSC Vimpelcom and Ukraine’s market leader Kyivstar to merge to create new company, VimpelCom Ltd.

* VimpelCom Ltd will be biggest mobile operator in emerging markets in Europe, Middle East and Africa, Telenor says. Its proforma 2008 revenue would have been $12.6 bln, core earnings (EBITDA) at $6.3 bln and it had 85 million subscribers.

* Voting rights in VimpelCom Ltd: Alfa’s Altimo 43.89 percent, Telenor 35.42 percent, minorities 20.69 percent. Economic ownership: Altimo 38.46 percent, Telenor 38.84, minorities 22.70 percent.

* VimpelCom Ltd will launch an offer for all issued and outstanding shares in OJSC Vimpelcom subject to a greater than 95 percent acceptance threshold.

* Upon completion of the offer Telenor and Alfa’s telecoms arm Altimo will contribute their respective shareholdings in Kyivstar to VimpelCom Ltd.

* VimpelCom Ltd will be headquartered and tax resident in the Netherlands, incorporated in Bermuda.

* It will be listed on the New York Stock Exchange, its shareholders’ agreement is governed by New York law and any future shareholder disputes are to be resolved by arbitration proceedings in London.

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Tags: GSM, Kyivstar, mobile, Vimpelcom

3535 Comments2009-10-05+12%3A24%3A40CY.TALK+Editor on “New operator formed by Vimpelcom-Kyivstar merger”

CY.TALK Editor
October 5th, 2009 at 14:38
Alfa, Telenor make peace; plan $23 billion merger

MOSCOW/OSLO (Reuters) – Norway’s Telenor and Russian partner Alfa Group have agreed to merge their Russian and Ukrainian holdings into a New-York listed mobile operator worth over $23 billion, ending one of the longest ever Russian corporate wars.

The end to the row, which was seen as a major threat to foreign investment in Russia, and which could have seen Telenor lose its stake in Russia’s No. 2 mobile operator in payment of a $1.7 billion fine, sent Telenor’s stock surging 15 percent.

The deal followed calls by Russian Prime Minister Vladimir Putin to attract more international investment, and a meeting between Putin and Telenor Chief Executive Jon Fredrik Baksaas last week.

The deal will see Vimpelcom, worth around $18.4 billion, merge with Ukraine-based, unlisted Kyivstar, which analysts said was valued at $5.2 billion.

“Financially this is a good deal for Telenor. One could have imagined that they were under pressure to accept a worse deal. On the downside this means that Telenor will never be able to consolidate Kyivstar earnings into its accounts,” said Martin Hoff from Arctic Securities in Oslo.

The half-decade-long battle between Telenor and its powerful partner, the oil-to-telecoms Moscow-based Alfa Group, led by billionaire Mikhail Fridman, has been a black cloud hanging over Russia’s investment climate.

Telenor had faced the potential selloff of its stake in Vimpelcom to pay the $1.7 billion fine from a Siberian court over the joint venture’s expansion into Ukraine. The case was brought by Farimex, an obscure shareholder that Telenor had suspected was acting on behalf of Alfa, but which Alfa denied.

Investors feared Russian asset values would be destroyed if a Western investor, part owned by a European state, were stripped of a prime asset by a provincial court, although analysts had long predicted a corporate divorce, with Alfa getting Vimpelcom and Telenor acquiring Kyivstar.

GOOD NEWS FOR TELENOR, VIMPELCOM

Telenor said the two sides would suspend their legal battle and move ahead with the deal, which will create the biggest operator in emerging Europe, with 85 million clients, 2008 pro-forma sales of $12.6 billion and EBITDA of $6.3 billion.

The deal bears rough similarities to Alfa’s peace deal with BP, its partner in a Russian oil venture, where the British major took a reduced management role though their peace deal, although its stake in the joint venture remained the same.

Telenor currently holds 30 percent in Vimpelcom, while Alfa has 44 percent of voting stock. Telenor majority owns Kyivstar, and had been reluctant to part with control of the key asset. Alfa is a minority shareholder in Kyivstar.

Alfa’s telecoms unit said on Monday that Telenor would get 35.42 percent of voting shares in the new company, Vimpelcom Ltd, while Alfa would get 43.89 percent.

The free float will amount to 20.69 percent and the combined firm could be listed in New York in April 2010.

“It is good news for Vimpelcom because it gets 22 million Kyivstar clients, a very efficient company, which even in crisis is cash-positive,” said Konstantin Chernyshov from Moscow-based Uralsib brokerage.

Norwegian Industry Minister Sylvia Brustad also welcomed the deal. “From the information I’ve received so far this is a good deal for Telenor’s shareholders,” she said in a statement.
Minority shareholders in Vimpelcom would receive one depositary receipt in the new entity for each Vimpelcom depositary receipt currently held, or be bought out at 0.05 kopecks per depositary receipt.

Shares in Telenor surged nearly 15 percent on the news, before scaling back slightly to trade up 11.1 percent at 70.55 Norwegian crowns ($12.18) at 0900 GMT.