17 Mar 2010 13:38

Rostelecom share exchange: 15%-25% discount for preferred shares in regionals

MOSCOW. March 17 (Interfax) - The preferred shares in Svyazinvest's regional providers will be discounted 15%-25% when they are exchanged for ordinary shares in Rostelecom .

"We are discussing the range 15%-25%," Svyazinvest chief Yevgeny Yurchenko said in an interview with the newspaper Kommersant.

Yurchenko recalled that consultants have recommended that all preferred shares in the Svyazinvest group (except Rostelecom preferred shares) be exchanged for ordinary shares in the new company at a discount reflecting market prices.

"The size of the discount will be the same for all the regional providers," Yurchenko said.

"Some minority shareholders have spoken out against the discount, he said. "But we cannot agree with them, since that is not correct in relation to the owners of ordinary shares, where the ownership rights are much more wide reaching," he said.

Ernst & Young, which is conducting the valuation of Svyazinvest's companies and calculating the share conversion ratios, has already sent indicative estimates to consulting banks for their input. The final coefficients will be calculated based on the Russian accounting standards results for 2009, which are currently being prepared. The coefficients are being calculated using the discounted cash flow method and the market value method, which hinges on the average price of ordinary shares over a specific period of time last year.

Discussion of conversion coefficients at the subsidiaries will begin with a meeting of the board of directors of Dalsvyaz tentatively scheduled for April 26. "At a meeting of the board and later at the general shareholders' meeting for each of the regional providers, there will be a vote on the terms for merging one company to another. The agreement will also contain two coefficients: the number of ordinary and preferred shares which must be exchanged for one share in Rostelecom," Yurchenko said.

The reorganization must receive support from three-fourths of the shares represented at the meeting, including preferred shares. Svyazinvest owns 38% of ordinary and preferred shares at the regional providers.