Norwegian telco Telenor has agreed to up its stake in Russian mobile network operator Vimpelcom to 29.9% of voting stock and 33.8% of common stock, through a total return equity swap deal with minority shareholder ING Bank. Telenor says it believes the transaction will increase the likelihood of three or more of its nominees being elected to Vimpelcom’s board of directors at the cellco’s annual general meeting of shareholders scheduled for 29 June. Vimpelcom’s common stock ownership at the end of March 2007 was reported as: Russia’s Alfa Group (35.8%), Telenor (26.6%), treasury shares (0.4%) and others (0.8%), with the remaining 36.4% in free float. That month Alfa Group agreed to acquire more than 800,000 shares from Deutsche Bank for USD256.4 million, thereby increasing its stake to 37.7%.
Telenor’s notice of the transaction and a subsequent amendment to the Oslo Stock Exchange reads: ‘On 11 May 2007 Telenor East Invest entered into an amendment to its total return equity swap agreement with ING Bank, enabling Telenor to purchase and take physical ownership of 7,666,900 of the ADRs purchased by ING under their total return equity swap agreement, giving Telenor 29.9% of the voting stock in [Vimpelcom] and 33.6% of Vimpelcom’s common stock…Under the [agreement] Telenor had economic exposure to up to 3.522% of the shares in [Vimpelom]. Telenor has also agreed to extend the swap agreement until 2 June 2008 to cover the remaining 447,400 ADRs acquired by ING pursuant to the original agreement. This amendment entitled Telenor to purchase from ING 7,666,900 Vimpelcom ADRs (equivalent to 1,916,725 shares of the common stock) for a price per ADR of USD97.15261 (USD744,859,345.6 in aggregate). The extended swap agreement will not provide Telenor with any voting or investment rights over the remaining 447,400 Vimpelcom ADRs. Through its direct ownership of shares and ADRs, as well as its remaining economic exposure to ADRs under the extended swap agreement, Telenor will now have economic exposure to 33.8% of Vimpelcom’s common stock.’