Vimpelcom-Kyivstar merger ‘nearly done’ following Farimex withdrawal and shareholder backing

16 Apr 2010

According to Reuters, Norwegian telecoms group Telenor said today that it is very near to closing a deal with Russia’s Alfa Group to merge their Russian and Ukrainian mobile interests, following a successful share exchange in the US and the withdrawal of a lawsuit. According to TeleGeography’s GlobalComms Database, in October 2009 Telenor forged an agreement with Alfa to combine common assets in Russia’s Vimpelcom and Ukraine’s Kyivstar to create a new US-listed mobile operator, potentially ending years of legal wrangling. If the deal is successfully completed, Kyivstar will be merged into Vimpelcom to create Vimpelcom Ltd. Telenor will take a 38.84% equity share in the new entity, while Alfa (via telecoms arm Altimo) will hold a 38.46% stake, with the remainder in free float. Altimo will retain a majority of voting shares (43.89%), while Telenor will hold 35.42% of voting rights. After receiving clearance from Russia’s Commission on Foreign Investments at the beginning of February, on 9 March 2010 the merger deal was approved by Ukraine’s Antimonopoly Committee.

The news that little-known Vimpelcom minority investor Farimex has dropped its Russian court case against Telenor clears one of the obstacles for the merger of Russia’s second largest cellco with Kyivstar, the mobile market leader in Ukraine. Telenor had faced the potential sell-off of its stake in Vimpelcom to pay the USD1.7 billion fine imposed by a Siberian court over delays it was adjudged to have caused to Vimpelcom’s expansion into Ukraine via the purchase of another cellco, Ukrainian Radio Systems (now rebranded under Vimpelcom’s ‘Beeline’ banner). Telenor suspected Farimex was acting on behalf of Alfa, an accusation Alfa denied. ‘We decided to withdraw the suit as there has been a resolution,’ Farimex lawyer Dmitry Chyorny told Reuters today (16 April). Meanwhile, some 97% of Vimpelcom shareholders have agreed to exchange their shares in the Russian operator into New York-listed stock in Vimpelcom Ltd, in a tender which ended yesterday. Telenor spokesman Dag Melgaard said of the two events: ‘We are very close to closing this deal, provided that the Farimex issue is settled at no cost to us and [given] the closing of the Russian part of the offer on 20 April. Russian bailiffs still hold our [Vimpelcom] shares in arrest, and this needs to be lifted and all proceedings cancelled. But we are very happy with these developments.’

Reuters clarifies that at least 95% of Vimpelcom’s shareholders must be in approval for the merger to be completed. Vimpelcom reported that after more than 308 million American Depositary Shares were tendered in the US offer to shareholders, it now expected to pass the overall 95% acceptance threshold. The Russian firm said Vimpelcom Ltd will begin trading today on the New York Stock Exchange on a ‘when-issued’ basis.