21 Dec 2010 13:59

Vimpelcom board approves Sawiris deal

MOSCOW. Dec 21 (Interfax) - The supervisory board at Vimpelcom Ltd Monday approved the deal with Weather Investments, owned by Egyptian billionaire Naguib Sawiris, but did not reach any decisions regarding changes to the shareholders agreement related to the deal.

The board "approved the proposed combination of VimpelCom and Weather Investments but did not take a decision on certain shareholder-related issues," the company said in a statement.

Six of nine directors, including all three independent directors and the three Altimo-nominated directors, voted in favor of the transaction, with the Telenor-nominated directors voting against the Transaction, it said.

The supervisory board did not approve an amended shareholder agreement or vote on other shareholder-related agreements due to Telenor's publicly stated position that, in its capacity as a shareholder of VimpelCom, it does not support the Transaction.

"In light of Telenor's opposition as a shareholder, at this time no agreement has been reached with respect to the shareholder related agreements that were contemplated to be entered into in connection with the transaction. As a consequence, the board has authorized the company's CEO to review and take into account the rights and obligations of the parties under the current VimpelCom Shareholders Agreement and bye-laws, and to negotiate further with Weather the terms and conditions under which Weather would be willing to enter into a revised transaction, taking into account that the Shareholder Related Agreements are unlikely to be signed and delivered. The Board has instructed the CEO to bring such revised terms, if any, back to the Board for consideration and approval."

A source with knowledge of the negotiating process told Interfax that Vimpelcom would hold another board meeting to vote on amendments to the shareholders agreement. "Since we're talking about a supplemental share issue in favor of Sawiris, the deal will also need to be discussed by the shareholders," the source said, adding that both meetings could take place in January.

Vimpelcom has said Telenor, one its major shareholders, was not supporting the proposed merger with Weather Investments, and that Telenor had stated its position in a letter to Vimpelcom Ltd dated December 19.

"As formally communicated to VimpelCom Ltd.'s Chairman yesterday, based on the information available to it and recent developments, Telenor ASA has determined that the proposed acquisition by VimpelCom Ltd. of Weather Investments S.p.A. is not in the best interests of VimpelCom shareholders and therefore does not intend to support the transaction," Telenor said.

"We strongly support VimpelCom's expansion in accordance with the principles agreed at the time the company was created. However, in our capacity as a shareholder of VimpelCom Ltd., we do not believe this transaction makes strategic or financial sense for VimpelCom's shareholders," said Telenor spokesman Dag Melgaard.

The Vimpelcom Ltd shareholders agreement says that am acquisition worth over $200 million is considered approved is five or more members of the board vote in favor of it. If fewer than five approve it, then the shareholders meeting may be asked to approve it, but only if at least five directors have no objection to this. If a deal is referred to a shareholders' meeting, it will need a simple majority to carry it, provided that at least 25% of the minority shareholders vote.

Vimpelcom Ltd is a holding set up in April this year to bring together Alfa-Group's and Telenor's Russia- and Ukraine-based cellular assets. The company signed an agreement at the beginning of October to buy Weather Investments, which owns 51.7% of Orascom Telecom and 100% of Wind, from Naguib Sawiris in a deal worth an estimated $6.6 billion, not including debt, which would turn Vimpelcom into the world's fifth biggest mobile communications firm by subscribers. Vimpelcom would buy the assets for 20% of its own shares and a cash consideration of $1.8 billion.

The possibility that Algerian provider Djezzy, one of the deal's prime assets, could be nationalized over outstanding tax debts of $230 million is one of the main question marks hanging over the deal. Many market participants doubt the deal will go through at all.

Apart from the unresolved situation in Algeria, Telenor's interests are not served by the fact that the Vimpelcom shareholders agreement may have to be amended in order to accommodate the possibility of Sawiris gaining three seats on the board of directors, VTB Capital said in an analytical note.

Sawiris told the Al Arabiya news channel Tuesday that he expected to receive new offers from Vimpelcom that would not alter the original parameters of the deal. He also said Djezzy had not been sold to the Algerian government.

The Interfax source said Sawiris had "certain commitments to Vimpelcom Ltd if the deal takes place without the Algerian asset." The source did not say what sort of commitments.

Vimpelcom Ltd includes telecommunications assets in Russia, Kazakhstan, Ukraine, Uzbekistan, Georgia, Armenia, Kyrgyzstan, Vietnam and Cambodia. Altimo and Telenor own 44.7% and 36% respectively. The free float is 19.3%, with Vimpelcom ADRs traded on the NYSE.