VimpelCom, Hutchison close deal to merge assets in Italy
MOSCOW. Nov 7 (Interfax) - CK Hutchison Holdings Ltd. and VimpelCom Ltd. have closed their deal to combine their Italian businesses, 3 Italia S.p.A. and Wind Telecomunicazioni S.p.A. (WIND), the companies said in a joint press release.
The combined assets were valued at 21.8 billion euros for the purposes of the deal.
The merger "will create a strong new operator in Italy, driving competition in the market and serving over 31 million mobile customers and 2.7 million fixed line customers," the companies said in the press release. "The joint venture will be positioned as a truly converged operator through its cooperation with Enel Open Fiber," they said.
The partners will own and control the joint venture on an equal footing.
Maximo Ibarra, the current Chief Executive Officer of WIND, will lead the joint venture, supported by Dina Ravera, who will serve as Merger Integration Officer, and Stefano Invernizzi, who will serve as Chief Financial Officer. Vincenzo Novari, the current CEO of 3 Italia, will be appointed as special adviser to CK Hutchison.
The financial results of the merged company will not be consolidated in the reporting of VimpelCom or Hutchison, except for net profit, which will be reported as profit form affiliated entities. The board of directors will consist of three VimpelCom representatives and three of Hutchison. It will start to pay dividends three years after closure of the deal.
Also, after three years post-completion, each shareholder can invoke a buy/sell mechanism at any time in the event of a major corporate dispute.
VimpelCom is contributing WIND Italy (Wind Telecomunicazioni), with net debt of 10.1 billion euros, to the joint venture, and Hutchison is contributing the debt-free assets of 3 Italia, plus 200 million euros cash. WIND is valued at 13.9 billion euros and 3 Italia at 7.9 billion euros. The deal is one of the biggest in the Italian telecoms market in the last decade.
VimpelCom said in February that it expected the deal to close at the end of 2016. The holding originally said it planned to close the deal within 12 months of it being signed, in other words in August 2016.
But the EC began an in-depth review of the deal at the end of March due to concerns that the merger of the telecom providers in Italy might lead to higher prices for mobile services and limit consumer choice, as well as lead to a reduction in investment in networks. The EC also said the deal would have reduced the number of mobile network operators effectively willing to host virtual network operators.
The European Commission approved the deal on September 1 and the partners received their final regulatory approval from the Italian Ministry of Economic Development on October 25.
In order to obtain clearance for the deal, VimpelCom and Hutchison struck an agreement with French operator Iliad, which will buy some towers and frequencies from VimpelCom's Wind Telecomunicazioni and Hutchison's 3 Italia.
"The approval is conditional on the divestment of sufficient assets that will allow a new operator to enter the market," the EC said on September 1.