Orascom Telecom plans to raise $2.4 bn (Egypt)
Orascom Telecom (OT) has announced that it is planning to raise its capital to $2.35 billion from US$1.26 billion pounds and that it planned to divide the company into two.
Orascom will call a general meeting on April 13 to approve the company split as well as the capital increase, which it said it would use to fund its debt, but did not give any further details.
Shareholders of Russian mobile operator, VimpelCom earlier this month approved a $6 billion-plus purchase of Wind Telecom, which owns OT, creating one of the world’s biggest mobile operators by number of subscribers.
According to OT, the VimpelCom deal would improve its negotiating position with the Algerian government over the fate of its unit in the country.
The firm has been locked in a long-running dispute with Algeria over the unit, Djezzy, its biggest single source of revenue. Uncertainty over its future had complicated the VimpelCom deal.
Algeria’s government, which said it will nationalize Djezzy, has hit the unit with hundreds of millions of dollars in back taxes and barred it from moving profits abroad.
It also blocked Orascom from selling the unit to South Africa’s MTN.
VimpelCom shareholders approve combination with Wind Telecom S.P.A.
VimpelCom Ltd. (“VimpelCom” or the “Company”) (NYSE: VIP) announced today that the Company’s shareholders approved all of the items on the agenda at today’s Special General Meeting, paving the way to complete the combination of VimpelCom and Wind Telecom S.p.A. (“Wind Telecom”) (the “Transaction”).
Alexander Izosimov, CEO and President of VimpelCom, commented: “The approval of this transformative combination with Wind Telecom by our shareholders will lead to the creation a new global telecom player with over 173 million mobile subscribers covering a population of 838 million people. The combined group will have a significantly diversified revenue base, substantially larger scale of operations, and potential synergies estimated to be US$2.5 billion on a net present value basis. This transaction and the shareholder vote underscore the Company’s dedication to delivering substantial value creation for shareholders and our commitment to corporate governance excellence.”
Shareholders representing 93.1% of the Company’s voting shares participated in the Special General Meeting. The resolutions at the Special General Meeting were approved by 53.3% of the voting shares that participated in the meeting. Of the Company’s public shareholders, present at the Special General Meeting 39.8% voted in favor of the resolutions and 60.2% voted against the resolutions.
The completion of the Transaction is subject to certain conditions precedent, such as receipt of regulatory approvals and receipt of funds to finance the Transaction. Completion of the Transaction is expected to occur in the first half of 2011.
About VimpelCom
VimpelCom Ltd. consists of telecommunications operators providing voice and data services through a range of wireless, fixed and broadband technologies. The VimpelCom Ltd. group is headquartered in Amsterdam and has operations in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikstan, Georgia, Armenia, Kyrgyzstan,Vietnam, Cambodia and Laos, covering territory with a total population of about 351,5 million. VimpelCom Ltd. operating companies provide services under the “Beeline” and “Kyivstar” brands. VimpelCom Ltd.’s ADSs are listed on the New York Stock Exchange under the symbol “VIP”.
About WIND TELECOM S.p.A.
WIND TELECOM S.p.A. is a leading international telecommunications company offering mobile, fixed, Internet and international communication services. WIND TELECOM S.p.A. owns 100% of Wind Telecomunicazioni S.p.A. and 51.7% of Orascom Telecom Holding SAE, which in turn operates GSM networks in Algeria,Bangladesh, Egypt, Pakistan, North Korea, and in Canada through its indirect equity ownership in Globalive Wireless. WIND TELECOM S.p.A., through its subsidiaries, is currently serving 117 million subscribers worldwide and is the entry point of choice for both technically advanced attractive markets and high-growth under-penetrated emerging markets.
Russia’s VimpelCom shareholders approve Wind Telecom deal
Russia’s VimpelCom has announced that its shareholders have approved the previously announced combination of VimpelCom and Wind Telecom, although Telenor is still objecting to the merger of the two companies.
Shareholders representing 93.1% of the Company’s voting shares participated in the Special General Meeting. The resolutions at the Special General Meeting were approved by 53.3% of the voting shares that participated in the meeting. Of the Company’s public shareholders, actually present though, just 39.8% voted in favor of the resolutions and 60.2% voted against the resolutions.
According to Alexander Izosimov, CEO and President of VimpelCom, the approval of this transformative combination with Wind Telecom by their shareholders will lead to the creation a new global telecom player with over 173 million mobile subscribers covering a population of 838 million people. The combined group will have a significantly diversified revenue base, substantially larger scale of operations, and potential synergies estimated to be US$2.5 billion on a net present value basis. This transaction and the shareholder vote underscore the Company’s dedication to delivering substantial value creation for shareholders and their commitment to corporate governance excellence.
The completion of the Transaction is subject to certain conditions precedent, such as receipt of regulatory approvals and receipt of funds to finance the Transaction. Completion of the Transaction is expected to occur in the first half of 2011.
Following completion of the Transaction, VimpelCom will own, through Wind Telecom, 51.7% of Orascom Telecom and 100% of Wind Italy.
VimpelCom welcomes announcement by Altimo on its commitment to preserve VimpelCom’s three independent board seats
VimpelCom Ltd. (“VimpelCom” or the “Company”) (NYSE: VIP) welcomes today’s announcement by Altimo Holdings & Investments Limited (“Altimo”) that Altimo is committed to preserving three independent seats on the Supervisory Board after the proposed combination of VimpelCom and Wind Telecom (the “Transaction”) is completed.
Altimo also affirmed the following:
- The current composition of VimpelCom’s Supervisory Board, including its three independent members, is not expected to change upon closing of the Wind Telecom transaction;
- The Wind Telecom transaction does not cause the termination of the Shareholders Agreement and, therefore, upon consummation of the transaction the Shareholders Agreement would still be in place; and
- Altimo intends to maintain three independent directors on the Supervisory Board even if the Shareholders Agreement were terminated in the future, with the three independent directors continuing to have the ability to break deadlocks at the Supervisory Board.
VimpelCom is committed to good corporate governance principles that safeguard the rights of all shareholders, including minority shareholders. Furthermore, the Company views the announcement by Altimo as an affirmation that all shareholders will continue to play an active role in corporate decision making.
The Special General Meeting of VimpelCom is scheduled to take place on March 17, 2011 to approve the issuance of up to 325,639,827 VimpelCom common shares and 305,000,000 convertible preferred shares and the increase of VimpelCom’s authorized share capital needed to complete this transaction.
VimpelCom’s Supervisory Board and Management Board recommend shareholders vote “FOR” the proposals by signing, dating and returning the WHITE voting card received from the Company.
Shareholders who need assistance or have questions about the voting process should call VimpelCom’s proxy solicitor, D.F. King & Co., Inc., toll-free in North America at +1 800 431 9645, toll-free in Continental Europe at 00800 5464 5464, +44 207 920 9700 from other locations, or call collect at +1 212 269 5550.
About VimpelCom
VimpelCom Ltd. consists of telecommunications operators providing voice and data services through a range of wireless, fixed and broadband technologies. The VimpelCom Ltd. group is headquartered in Amsterdam and has operations in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikstan, Georgia, Armenia, Kyrgyzstan, Vietnam and Cambodia, covering territory with a total population of about 345 million. VimpelCom Ltd. operating companies provide services under the “Beeline” and “Kyivstar” brands. VimpelCom Ltd.’s ADSs are listed on the New York Stock Exchange under the symbol “VIP”.
About WIND TELECOM S.p.A. (formerly Weather Investments S.p.A.)
WIND TELECOM S.p.A. is a leading international telecommunications company offering mobile, fixed, Internet and international communication services. WIND TELECOM S.p.A. owns 100% of Wind Telecomunicazioni S.p.A. and 51.7% of Orascom Telecom Holding SAE, which in turn operates GSM networks in Algeria, Bangladesh, Egypt, Pakistan, North Korea, and in Canada through its indirect equity ownership in Globalive Wireless. WIND TELECOM S.p.A., through its subsidiaries, is currently serving 117 million subscribers worldwide and is the entry point of choice for both technically advanced attractive markets and high-growth under-penetrated emerging markets.
Telenor urges VimpelCom shareholders to reject Wind purchase (Norway,Russia)
Telenor ASA has asked VimpelCom Ltd. shareholders to reject VimpelCom’s proposed merger of its telecommunications assets with those of Egyptian billionaire Naguib Sawiris.
According to Telenor, it has suggested VimpelCom to pay an extra dividend of at least $1 a share instead of pursuing the merger with Sawiris’s Wind Telecom.
As per the company, the excessive focus on the Wind Telecom transaction has already harmed the interests of all VimpelCom shareholders, as VimpelCom has fallen from second to third place in the Russian market.
Telenor opposes a plan by mobile-phone operator VimpelCom to issue new stock representing 20% of shares outstanding and 31% of voting rights to investors in Wind Telecom. The Norwegian company argues that most of Wind’s profit comes from Italy, which is a mature market counter to VimpelCom’s strategy of investing in emerging markets.
Telenor shareholders will meet on March 17 to vote on the issue of 630 million shares needed to complete the combination with Wind Telecom in a deal valued at about $6.5 billion. On March 1, a court in London rejected Telenor’s request for an order blocking the meeting.
The Norwegian company holds more than 39% of VimpelCom shares, approximately the same stake as Russia’s Alfa Group, which supports the merger. Alfa Group, which participates in VimpelCom through its telecom subsidiary Altimo, has 44.7% of votes to Telenor’s 36%.
TELENOR: VimpelCom, Altimo, Telenor and Weather give undertakings to the Court in substitute for an injunction
VimpelCom Ltd., Altimo Holdings & Investments Ltd., Telenor and Weather Investments II S. .r.l., the principal shareholder of Wind Telecom S.p.A., today gave undertakings to the Commercial Court in London in order to avoid an injunction being granted. By the undertakings, VimpelCom, Altimo and Weather have agreed to take all necessary actions to cause Telenor’s pre-emptive right shares to be promptly issued if the arbitration tribunal grants an award in Telenor’s favor.
These undertakings have the same force as an injunction in England, and any breach of the undertakings would be a contempt of Court. Telenor commenced an arbitration proceeding on 28 January 2011 against VimpelCom and Altimo under the VimpelCom Shareholders Agreement in order to protect Telenor’s pre-emptive rights in the context of VimpelCom’s proposed acquisition of Wind Telecom. Telenor petitioned the Court to provide injunctive relief to protect its voting stake in VimpelCom pending completion of the arbitration proceedings and to ensure that an arbitral award in Telenor’s favor can be enforced (as further discussed in Telenor’s press releases of 31 January 2011 and 7 February 2011).
VimpelCom, Altimo, Telenor and Weather also gave undertakings to the Court, conditioned on the arbitration tribunal granting an award in Telenor’s favor, that Telenor be awarded damages in the amount of lost dividends on the pre-emptive right shares, which amount can be set off against Telenor’s purchase price for the pre-emptive right shares. Further, during a one-year period from today (or such other period as the arbitration tribunal will determine), the following undertakings were given:
- Altimo agreed that it would not to take any action, including transferring its shares, that would cause Telenor and Altimo’s combined voting percentage in VimpelCom to fall below a simple majority;
- Telenor agreed that it would not transfer its VimpelCom shares; and
- VimpelCom, Altimo and Telenor agreed not to undertake, or cause VimpelCom to undertake, any acquisition, M&A Transaction, share issuance or other action that would dilute Telenor below 25% or that would cause Telenor and Altimo’s combined ownership to fall below a simple majority of VimpelCom’s voting shares, provided that Telenor has exercised all rights available to it under the VimpelCom Shareholders Agreement to maintain its voting stake in VimpelCom.
VimpelCom, Telenor and Altimo also agreed to enact stop-orders on Telenor and Altimo’s shares on VimpelCom’s share register in order to ensure compliance with the agreed transfer restrictions.
“Telenor is pleased with the Court’s determination to accept undertakings from VimpelCom, Altimo and Weather, which stand in place of an injunction and which we believe will ensure Telenor is able to enforce any arbitration award in its favor and, ultimately, receive the pre-emptive right shares to which it is entitled. Telenor remains confident that the arbitration tribunal will recognize Telenor’s right to receive the pre-emptive right shares if VimpelCom’s proposed acquisition of Wind Telecom is completed,” said Telenor spokesman Dag Melgaard.
VimpelCom confirms supervisory board recommendation that shareholders vote ‘for’ proposals at special general meeting scheduled for March 17, 2011; announces ISS decision
VimpelCom Ltd. today affirmed that the Company’s Supervisory Board recommends that VimpelCom shareholders vote “FOR” approval of the issuance of VimpelCom common shares and convertible preferred shares and the increase of VimpelCom’s authorized share capital needed to complete the combination of VimpelCom and Wind Telecom S.p.A. (“Wind Telecom”). The Company also believes that Institutional Shareholder Services (ISS), a proxy advisory firm, has reached an incorrect conclusion in its recommendation regarding the proposed combination of VimpelCom and Wind Telecom, a conclusion which is contrary to the recommendation of VimpelCom’s three independent directors.
In contrast to the recommendation of ISS, in a report dated February 25, 2011, Glass Lewis & Co., a leading independent proxy advisory firm, recommended that VimpelCom shareholders vote “FOR” the issuance of common and convertible preferred shares and the increase in authorized share capital needed to complete the combination, saying that “the Company should be provided the flexibility to use its equity in a manner that could provide funding for its operations and enhance shareholder value.”
Jo Lunder, the Chairman of VimpelCom’s Supervisory Board, commented: “As Chairman of the Company and an independent director, I am convinced that the Supervisory Board and management have thoroughly reviewed and considered all aspects of this transaction. The majority of the board, including all three independent directors, supports the expansion of our growth platform as it is strategically compelling and financially attractive. The Company looks forward to the upcoming Special General Meeting and is confident the combination will be approved when all our shareholders have a chance to vote.”
The Special General Meeting of VimpelCom is scheduled to take place on March 17, 2011 to approve the issuance of up to 325,639,827 VimpelCom common shares and 305,000,000 convertible preferred shares and the increase of VimpelCom’s authorized share capital needed to complete this transaction.
VimpelCom’s Supervisory Board and Management Board recommend shareholders vote “FOR” the proposals proposal by signing, dating and returning the WHITE voting card received from the Company.
Shareholders who need assistance or have questions about the voting process should call VimpelCom’s proxy solicitor, D.F. King & Co., Inc., toll-free in North America at +1 800 431 9645, toll-free in Continental Europe at 00800 5464 5464, +44 207 920 9700 from other locations, or call collect at +1 212 269 5550.
About VimpelCom
VimpelCom Ltd. consists of telecommunications operators providing voice and data services through a range of wireless, fixed and broadband technologies. The VimpelCom Ltd. group is headquartered in Amsterdam and has operations in Russia,Ukraine, Kazakhstan, Uzbekistan, Tajikstan, Georgia, Armenia, Kyrgyzstan, Vietnam and Cambodia, covering territory with a total population of about 345 million. VimpelCom Ltd. operating companies provide services under the “Beeline” and “Kyivstar” brands. VimpelCom Ltd.’s ADSs are listed on the New York Stock Exchange under the symbol “VIP”.
Telenor makes new move to protect Holding in VimpelCom (Norway)
Telenor ASA has launched a legal action that could potentially overturn the $6-billion acquisition of Wind Telecom by Russia’s VimpelCom Ltd. , in which Telenor holds a 40% stake.
Norway’s largest telecoms firm, Telenor is seeking an order that would require VimpelCom to issue extra shares in its favor at the same time that it issues shares for Wind, which is controlled by Egyptian billionaire Naguib Sawiris.
According to the company, it has petitioned the Commercial Court in London for an injunction that would see those shares placed in escrow until the conclusion of the arbitration proceeding that it launched Jan. 28.
Telenor has been at disputes with VimpelCom’s management and Altimo, a rival shareholder in the company, over the deal, which would create the world’s fifth-biggest mobile operator by subscribers.
Telenor had lost its pre-emptive rights after an Altimo shareholder purchased a stake in Egypt-based Orascom Telecom Holding, which is more than half-owned by Wind Telecom.
The purchase made the acquisition of Wind a related-party transaction, preventing Telenor and other shareholders from exercising their pre-emptive right to buy shares and counteract the reduction of their stakes in the company.
The share issue in Wind’s favor will be voted on by VimpelCom shareholders on March 17 and is set to be at the final stage of the Russian mobile operator’s troubled acquisition of heavily indebted Wind.
As per the acquisition terms, VimpelCom will pay Wind Telecom $1.495 billion in cash, while Wind will also get 325.6 million new VimpelCom common shares and 305 million new convertible preferred shares, which have voting rights.
Telenor takes legal action to prevent VimpelCom merger
Telenor’s opposition to VimpelCom’s proposed acquisition of Wind Telecom (formerly Weather Investments) shows no sign of letting up, with the Norwegian firm initiating a court case to protect the pre-emptive rights†that it enjoys as a key VimpelCom shareholder.
With economic interest of 39.6% and a voting share of 36%, Telenor’s stake in VimpelCom is second only to Russian group Altimo’s. Together with VimpelCom, the Russian group is the target of Telenor’s legal action, with the Norwegian company arguing that VimpelCom’s proposed acquisition of Wind Telecom is not a Related M&A Transaction under the VimpelCom Shareholders Agreement.â€
Telenor’s objection stems from a discrepancy between economic and voting rights that will arise if the deal closes; the voting interest of current Wind Telecom shareholders would be significantly higher than their economic interest 30.6% against 20% respectively.
Meanwhile, Telenor’s voting stake would be lower than its economic stake 25% and 31.7% respectively. Maintaining its objection that the merger with Wind Telecom would not be in the best interests of VimpelCom shareholdersâ€, Telenor is attempting to prevent VimpelCom shares from being issued to Wind shareholders essentially derailing the merger.
VimpelCom Supervisory Board Approves New Terms for Combination With WIND TELECOM S.p.A.
VimpelCom Ltd. announced today that VimpelCom’s Supervisory Board gave its final approval for the proposed combination of VimpelCom and WIND TELECOM S.p.A. (“Wind Telecom”, formerly Weather Investments S.p.A.). Six of nine directors, including all three independent directors and the three Altimo-nominated directors, voted in favor of the Transaction, with the three Telenor-nominated directors voting against the Transaction.
Following completion of the Transaction, VimpelCom will own, through Wind Telecom, 51.7% of Orascom Telecom Holding S.A.E. (“Orascom Telecom”) and 100% of WIND Telecomunicazioni S.p.A. (“WindItaly”). The combination of VimpelCom and Wind Telecom, as previously announced on 4 October 2010, will create the world’s sixth largest mobile telecommunications carrier by subscribers with pro forma adjusted net operating revenues of US$21.3 billion and pro forma EBITDA of US$9.4 billion for the year ended 31 December 2009.
The management and the Supervisory Board continue to believe strongly in the strategic rationale of the Transaction which will create a new global telecom player with significant scale and an attractive mix of developed and emerging market assets, well-positioned to realize profitable growth.
Jo Lunder, the Chairman of VimpelCom’s Supervisory Board, commented: “VimpelCom’s Supervisory Board is pleased to approve this transaction. This combination will create a top-tier global telecoms company and should drive significant value for all our shareholders. While we acknowledge Telenor’s divergent view, we believe that the majority of our shareholders recognize the strategic and financial merits of this transaction. In the end, as it should be with a public company, it will be the special general meeting of shareholders that will make the final determination.”
Alexander Izosimov, Chief Executive Officer of VimpelCom, added: “We have made substantial progress since we announced this transaction last October and we remain on track to close in the second quarter of this year. We continue to believe that this transaction offers our shareholders exposure to attractive growth markets and the opportunity to diversify further our revenue base in terms of geography, currency and market characteristics. It also positions VimpelCom to take full advantage of the significant opportunities that we see in the fast-growing mobile data services market.”
Transaction rationale
The combination of VimpelCom and Wind Telecom will create a new global top-tier telecom operator, which is expected to lead to substantial value creation for shareholders, both in the short and long term. The combination is consistent with the original objectives announced by our strategic shareholders when creating VimpelCom Ltd., namely to increase the current scope of operations and scale of the business.
The enlarged company will operate in 19 countries around the world, covering a population of 838 million people, with over 173 million mobile subscribers.
VimpelCom’s revenue base will be significantly diversified. Based on 2009 pro forma revenues, the existing operations in Russia and Italy will each account for approximately 35% of the combined company. The group will also have an attractive mix of developed and emerging market assets in Eastern Europe, Asia and Africa. In addition, the combined group will benefit from a more balanced growth profile between increasing market penetration and growing usage, in particular in mobile data services, across its portfolio, resulting in a robust and diversified cash flow and currency structure.
The Transaction is financially attractive and offers good value creation for shareholders, in particular taking into account that the equity consideration represents a relatively small proportion of the total enterprise value. The implied EV/EBITDA multiple is low compared to recent precedent transactions in the telecoms sector. In addition, the Transaction preserves the Company’s dividend payout commitment.
Finally, there is significant potential for value creation from synergies between VimpelCom and Wind Telecom operations, with an estimated net present value of US$2.5 billion. These synergies will be primarily derived from procurement operational expenses and capital expenses.
Transaction terms
Under the new terms of the Transaction, Wind Telecom shareholders will contribute to VimpelCom their shares in Wind Telecom in exchange for consideration consisting of 325,639,827 newly-issued VimpelCom common shares, 305,000,000 newly-issued VimpelCom convertible preferred shares and US$1,495 million in cash. The newly-issued convertible preferred shares will have the same rights as the existing convertible preferred shares. In addition, at or shortly after the closing of the Transaction, certain assets will be demerged from the Wind Telecom group and transferred back to Weather Investments II S.a.r.l., the 72.65% shareholder of Wind Telecom (“Weather II”), as further described below.
The VimpelCom common and convertible preferred shares issued to Wind Telecom shareholders at the closing of the Transaction will together represent approximately a 20.0% economic interest and a 30.6% voting interest in the enlarged VimpelCom group. Upon issuance of the new VimpelCom common and convertible preferred shares, Telenor ASA, holding through its subsidiaries Telenor Mobile Communications AS and Telenor East Invest AS (“Telenor”), and Altimo Holdings & Investments Limited, holding through its subsidiary Altimo Cooperatief U.A. (“Altimo”), will hold approximately 31.7% and 31.4% of the economic rights and 25.0% and 31.0% of the voting rights, respectively, of VimpelCom. Minority shareholders in VimpelCom will represent approximately 17.0% of the economic rights and 13.4% of the voting rights.
Algerian value sharing arrangement
Notwithstanding the Algerian Government’s ongoing measures against Orascom Telecom’s Algerian subsidiary, Orascom Telecom Algerie (“OTA”), OTA remains a strategically important asset for VimpelCom. VimpelCom is therefore interested in exploring with the Algerian Government a resolution which would allow VimpelCom to retain OTA following completion of the Transaction.
In the event that such a resolution is not possible within a reasonable time frame, VimpelCom has sought to lessen its financial exposure to the situation surrounding OTA by agreeing with Weather II an option, which can be exercised by VimpelCom at any time within six months from the closing of the Transaction, to enter into a value sharing arrangement with Weather II with respect to Orascom Telecom’s shareholding in OTA.
This value sharing arrangement provides for any financial losses or gains arising from the sale of all or part of OTA to the Algerian Government or from the eventual settlement of the disputes between OTA and the Algerian Government to be shared in certain pre-agreed proportions between VimpelCom and Weather II. This sharing arrangement would involve cash payments to/from VimpelCom and Weather II based on certain formulae linked to an agreed implied equity value of VimpelCom’s see-through ownership of OTA under various scenarios (Wind Telecom owns 51.7% of OTH which in turn owns 96.8% of OTA). In particular, the arrangement provides significant downside protection for VimpelCom in Algeria.
Financing
Following the 4 October 2010 announcement, VimpelCom and Wind Telecom launched the required financing processes. VimpelCom has obtained commitments of up to US$6.5 billion from Russian and international banks. Of this amount, VimpelCom expects to draw down approximately US$5.0 billion to finance the cash portion of the transaction consideration and to re-finance the Orascom Telecom debt which will be due upon acquisition by VimpelCom. Half will be raised in the form of a Russian rouble term loan and the balance via a US dollar bridge loan to be refinanced in the bond markets.
Wind Italy refinanced US$8.5 billion in November 2010 (fully ring-fenced from VimpelCom) and obtained necessary waivers from its high yield and PIK note holders.
The gross debt and net debt of the combined entity as the end of the third quarter of 2010 were US$24.8 billion and US$21.1 billion, respectively. The gross debt will increase to approximately US$25.7 billion post transaction and net debt to approximately US$21.7 billion. This increase is based on the impact of the Transaction consideration, the refinancing of Wind Italy, proceeds from the sale of the Tunisian operations of Orascom Telecom and various other costs. The net debt to EBITDA ratio on this basis would be 2.3x which is expected to be reduced in the two years thereafter to a level below 2.0x.
Orascom Telecom Spin-off and Wind Italy Spin-off
Wind Telecom’s interests in the assets to be demerged principally comprise Orascom Telecom’s investments in Egypt and North Korea and Wind Italy’s Wind International Services S.p.A. subsidiary, and certain other less significant assets. The assets owned directly by Wind Italy are contemplated to be transferred to the current Wind Telecom shareholders (“Wind Italy Spin-off”) on the closing date of the Transaction or immediately following the closing. The assets held through Orascom Telecom are contemplated to be transferred shortly after the closing date of the Transaction to the current Orascom Telecom shareholders (including Weather II) (“Orascom Telecom Spin-off”).
Both the Orascom Telecom Spin-off and the Wind Italy Spin-off are subject to a number of conditions precedent, including, in the case of the Orascom Telecom Spin-off, regulatory approval and approval at an Extraordinary General Meeting of Orascom Telecom shareholders. If the Orascom Telecom Spin-off is not completed, an additional amount of up to US$770 million in cash will be payable by VimpelCom to Wind Telecom shareholders and the Orascom Telecom Spin-off assets will remain within the combined group. If the Wind Italy Spin-off is not completed, an additional amount of US$100 million in cash will be payable by VimpelCom to Wind Telecom shareholders and the Wind Italy Spin-off assets will remain within the combined group.
Shareholder meeting and pre-emptive rights
The issuance of the VimpelCom common shares and convertible preferred shares in the Transaction requires the approval of a majority of shareholder votes present at the forthcoming Special General Meeting of VimpelCom shareholders (the “VimpelCom SGM”). We understand that Telenor remains opposed to the Transaction.
On January 10, 2011, Altimo informed VimpelCom that one of its affiliates owns shares in Orascom Telecom with a market value of approximately US$27.7 million and therefore, in their view, the Transaction should be treated as a “Related M&A Transaction” under the terms of the existing Shareholders Agreement among Altimo, Telenor and the Company.
The Company has also received letters from Telenor wherein Telenor asserts that it is entitled to pre-emptive rights under the Shareholders Agreement in connection with the issuance of new shares to the Wind Telecom shareholders. Telenor alleges that Altimo’s actions in this regard are a breach of the clause in the Shareholders Agreement requires the parties to act in good faith and in a constructive manner such as to give effect to the provisions of the Shareholders Agreement. Telenor’s letters further assert that the Company will be actively participating in Altimo’s efforts to prevent Telenor from exercising its pre-emptive rights if the Company takes the position that no pre-emptive rights apply to the Transaction. Telenor has stated that it will pursue all available remedies against the Company, Altimo and Wind Telecom shareholders in the event any shares are issued to the Wind Telecom shareholders without giving effect to Telenor’s claimed pre-emptive rights.
After considering the information received from Altimo and Telenor and after taking into account legal advice given to the Company and to its independent directors, the Supervisory Board of VimpelCom concluded that the Transaction should be regarded as a Related M&A Transaction. As a Related M&A Transaction, the Transaction will not be subject to any pre-emptive rights for either Altimo or Telenor under the Shareholders Agreement upon the issuance of the new shares to the Wind Telecom shareholders.
Shareholders Agreement
Under the revised terms of the Transaction, the existing Shareholders Agreement among Altimo, Telenor and the Company will not be amended. The Shareholders Agreement will remain in effect following the Transaction, provided that neither Altimo nor Telenor fall below a 25% voting stake in the Company as a result of a transfer of any of their respective shares. Under the Shareholders Agreement, Telenor and Altimo will continue to have the right to designate three board members each and three board members will continue to be unaffiliated with either Altimo or Telenor.
Estimated timetable
The conditions precedent to closing of the Transaction include, among others, receipt of consents required under competition or anti-trust laws in certain jurisdictions, VimpelCom shareholder approval for the issuance of new VimpelCom common and convertible preferred shares in connection with the Transaction and completion of actions and transactions required to be completed before closing pursuant to the refinancing plan for the Transaction.
The VimpelCom SGM to authorize the issuance of new common and convertible preferred shares is scheduled to take place on March 17, 2011. The Transaction is expected to close during the first half of 2011 following receipt of regulatory approvals. Each of VimpelCom and Wind Telecom has the right to terminate the Transaction at any time prior to receipt of shareholder approval at the VimpelCom SGM for the issuance of the new shares to the Wind Telecom shareholders pursuant to the Transaction.
Advisors
VimpelCom has engaged UBS Investment Bank and Deutsche Bank AG to act as its financial advisors and Akin Gump Strauss Hauer & Feld LLP to act as its legal advisor.
Citigroup Global Markets Limited acted as financial advisor to the Supervisory Board of VimpelCom.
UBS Investment Bank, Deutsche Bank AG and Citigroup Global Markets Limited each provided a fairness opinion to the Supervisory Board of VimpelCom.
