Sistema signs memorandum on asset reorganization with Svyazinvest, Comstar
MOSCOW. Nov 23 (Interfax) - The Sistema holding has signed a non-binding Memorandum of Understanding with the Svyazinvest holding and fixed-line provider Comstar-UTS, Sistema's indirect subsidiary, and initiated the negotiations process over the reorganisation of certain assets, Sistema and Comstar said in statements.
The outcome of these negotiations may result in the disposal of Sistema's stake in CJSC Sky Link, the sale of Comstar-UTS's stake in JSC Svyazinvest, and the increase of Comstar-UTS's ownership in JSC Moscow City Telephone Network (MGTS) (RTS; MGTS).
Comstar-UTS currently owns 25% +1 share of Svyazinvest and a 55.7% stake in MGTS, whilst Sistema holds a 50% stake in CJSC Sky Link. Svyazinvest owns a 23.3% stake in MGTS. According to the MOU, Sistema may potentially sell its stake in Sky Link, whilst Comstar-UTS may dispose of its stake in Svyazinvest and acquire Svyazinvest's holding in MGTS. Furthermore, according to the MOU, all parties may restructure the outstanding debt in relation to these transactions.
The exact terms and conditions of these transactions are subject to further negotiations and will be determined in separate binding legal agreements between the above mentioned and other potentially interested parties. The completion of these transactions is subject to certain conditions, including receiving necessary approvals from the regulatory bodies and obtaining a valuation. No assurance can be given that any of the parties to this MOU will execute definitive agreements or that any of the contemplated transactions will occur.
A source familiar with the memorandum told Interfax that the document calls for the deal to be closed by February 15, 2010.
Earlier reports said Sistema will receive 28% ordinary shares (23.3% of issued shares) in MGTS under the assets swap and get its debt of 26 billion rubles to Sberbank canceled. The state regains 25% plus one share in telecoms holding Svyazinvest and receives 100% in CMDA provider Sky Link. Agreement with Danish lawyer Jeffrey Galmond, who owns 50% of Sky Link, has already been reached. Sistema owns the other 50% of the operator.
The state-owned Vnesheconombank (VEB) will buy 25% plus one share in Svyazinvest based on a valuation of 23.7 billion rubles performed by Ernst & Young. The 23.3% that Svyazinvest is selling is valued at 12 billion rubles. Sistema will compensate the difference between the value of the assets by handing 100% of Sky Link to Svyazinvest.
Thus, Svyazinvest will own Sky Link and not Rostelecom , which will eventually consolidate Svyazinvest's assets.
A source said last week that Sky Link is more than 20 billion rubles in debt, and that the loans of its shareholders account for more than half of this. The debt to shareholders will be converted into seven-year promissory notes, and agreement has been reached with Sberbank to restructure debt of approximately $90 million.