Telenor buys prefs from Sawiris to up Vimpelcom stake to 36.4%, withdraws claim
(adds details of the put and call option)
MOSCOW. Feb 16 (Interfax) - Telenor has increased its voting stake in Vimpelcom Ltd. from 25.01% to 36.36% by buying a stake of preferred shares (234 million shares) from Weather Investments, owned by Egyptian billionaire Naguib Sawiris, for $374.4 million, and has also withdrawn an arbitration claim.
In connection with the transaction, Telenor has withdrawn all its claims against Altimo Holdings & Investments Ltd., Altimo Cooperatief U.A. and VimpelCom Ltd. in the pending arbitration proceeding, and will work to expand the VimpelCom Board to eleven members from nine.
Telenor's withdrawal of its claims will result in the termination of the VimpelCom shareholders agreement.
The two additional seats on VimpelCom's board will be filled by candidates from Weather, which is not currently represented on the board, a source at Telenor told Interfax.
"I am very happy about this transaction which will allow Weather to participate actively in the Supervisory Board of VimpelCom, will foster improved corporate governance of the company and ensure a better focus of the management on industrial issues in a context in which the existing disputes among the key shareholders have been resolved," Telenor's statement quoted Naguib Sawiris as saying.
The deal was made between Telenor and Sawiris. Altimo was not involved in the deal, Telenor said.
"This transaction takes Telenor to approximately the same voting position as a successful outcome of the arbitration process would have achieved, and is therefore a commercial solution we are happy with," said Jon Fredrik Baksaas, Telenor's CEO. "The withdrawal of the arbitration claim will prevent further dilution of the VimpelCom shareholders, and it will enable a more normal corporate governance situation in VimpelCom. We will work to expand the VimpelCom Board to eleven members. Together with the other shareholders we will continue our contribution to the industrial development of VimpelCom as we always have done."
Simultaneously with Telenor's purchase of VimpelCom preferred shares from Weather, Telenor and Weather have entered into certain put and call arrangements regarding the remaining 71,000,000 VimpelCom preferred shares held by Weather.
The option can be exercised until April 15, 2016 at a price of $113.6 million plus 9% annually. Interest is accrued on an annual basis from the moment the agreement is signed.
Weather Investments II is not entitled to sell or pledge this block of shares as collateral whole then option is valid. But Sawiris can exercise his right to convert these preferred shares into ordinary shares. Vimpelcom's preferred shares are not traded on the stock exchange and do not pay dividends, but they do carry the right to vote on an equal footing with ordinary shares.
Telenor must say whether it intends to use the option three months before it expires.
A spokesman for Vimpelcom told Interfax that the company welcomes the deal between Telenor and Sawiris because it lifts the uncertainty over the arbitration proceedings.
Altimo vice president Yevgeny Dumalkin told Interfax that his company was not a party to the agreement, and was informed by Telenor only several hours ago, so it is not prepared to comment in detail.
"We will study the issue, particularly from the legal point of view. We will comment in detail later," Dumalkin said. "It appears that this is good news," he added.
Telenor in late January 2011 filed a lawsuit in London against Vimpelcom and Altimo to protect its preemptive rights to buy Vimpelcom shares in a deal in which Vimpelcom was to acquire Wind Telecom from Sawiris.
Telenor, which opposed the deal with Sawiris, said it would not block it, but intended to exercise its preemptive rights to buy shares in order to prevent the dilution of its stake in Vimpelcom. However, Telenor was unable to do so, because it turned out that companies controlled by Altimo minority shareholder Gleb Fetisov owned 0.7% of Orascom Telecom, a division of Wind Telecom, and the deal with Sawiris was classified as an interested part transaction.
In April 2011, VimpelCom closed the deal to acquire Wind Telecom for cash and shares. The deal gave Sawiris an 18.8% economic interest in Vimpelcom and 29.6% of voting shares - preferred shares vote but do not receive dividends.
The stakes in Vimpelcom held by Telenor and Altimo decreased to 31.7% and 31.4% economic interest, respectively, and 25.007% and 31% of votes. Prior the deal, Telenor owned 39.6% (36% of votes) and Altimo had 39.2% (44.7%).
As a result of the purchase of preferred shares from Weather, Telenor has acquired the largest voting stake in Vimpelcom.
Weather has 18.28% of voting shares (18.78% economic interest), and Altimo now holds 24.99% of votes (31.35%).
In June 2011, Altimo sold 123.6 million preferred shares (5.995% of votes) in Vimpelcom to Forrielite, a firm owned by OJSC Rusnano deputy general director Oleg Kiselev. The deal allowed Altimo to reduce its votes in Vimpelcom to 24.9981%, below the 25% threshold stipulated in the agreement, and initiate the dissolution of the shareholder agreement.
Telenor said it had documented evidence that the Virgin Islands firm Sparrowhill Trading Ltd., which provided Forrielite with $108 million in financing to buy the preferred shares, is controlled through a chain of offshore companies and two individuals by Alfa Group principal shareholders Mikhail Fridman, German Khan and Alexei Kuzmichev. Therefore, Telenor alleged, this deal was a fiction. At the beginning of this year, Forrielite sold its packet of preferred shares to Bertofan Investments Ltd., which represents the interests of the EastOne group of Ukrainian tycoon Viktor Pinchuk.
If Altimo buys back these shares, its voting stake will be 30.9%, which is still less than Telenor's voting interest.
Telenor previously wanted to preserve the shareholder agreement. It has a mechanism under which the fate of all key decisions for the company depends on independent directors. Altimo and Telenor each nominate three representatives to the board of directors, and the remaining three directors are not affiliated with either of the principal shareholders.
The dissolution of the agreement triggers a Vimpelcom charter regulation under which the board can include seven to 13 directors elected by cumulative vote (each voting share gives its owner the number of votes equal to the number of directors on the board). In that case, Weather Investments could appoint its own representatives to the board. Telenor previously opposed this scenario, and market players assumed that Sawiris would be an ally of Altimo.
Telenor last October 31 filed a lawsuit in London disputing the expiration of the shareholders agreement and asked for an injunction against this until the lawsuit is resolved. At the end of November, Telenor and Altimo reached an agreement to maintain the existing corporate governance system at Vimpelcom Ltd. until litigation over the shareholders agreement was resolved. Since then, Vimpelcom has operated according to the current charter as if it continues to be valid.
