VimpelCom decides over Egypt's Weather Investments II today

Ahram Online, Thursday 17 Mar 2011

Vote would create world's fifth-largest telecom operator, a move fiercely opposed by rivals

The success of the deal is widely believed to give power to Sawiris' Orascom Telecom, as it will become a part of a stronger and larger telecom entit (Photo: reuters)

VimpelCom Ltd, the Russian mobile phone operator seeking to combine assets with Egyptian Tycoon Naguib Sawiris’s Weather Investments, will hold its extraordinary general assembly meeting Thursday during which the Amsterdam-based company will seek approval to issue about 630 million shares needed to complete its combination with Weather Investments’ Wind Telecom unit, in which Sawiris family own 74%.

During the meeting, members of the assembly will vote on the issuance of 325.64 million common shares and 305.00 million convertible preferred shares, to be granted to Weather Investments II as a part of the Vimpelcom/Wind deal, as well as the increase in Vimpelcom’s share capital, in order to complete the transaction.
The success of the deal is widely believed to give power to Sawiris' Orascom Telecom, as it will become a part of a stronger and larger telecom entity.
Also, OT’s shareholders might benefit in the asset spin-off process, if a cash option was granted to them
According to Beltone's weekly report, if 51 per cent of Vimpelcom’s shareholders, representing major shareholder Altimo (39.2 per cent economic stake, 44.7 per cent voting rights) and minority shareholders (21.2 per cent economic stake, 19.3 per cent voting rights), voted in favour of issuing the new shares to Weather Investments on 17 March 2011, then the deal should be on track to proceed.
However, the issuance of new shares will have to await the arbitration decision regarding rival Telenor ASA claim for pre-emptive shares, so as to grant it the right to participate in the new share issuance, in order to avoid the dilution of its current economic stake of 39.6% and voting rights of 36.0%.
On 2 March a UK court rejected a request by Telenor for an injunction suspending today's Vimpelcom shareholders meeting, unless Vimpelcom agreed to issue pre-emptive shares to Telenor.
The Court also rejected Telenor’s alternative request to have pre-emptive shares issued to it in escrow, until the decision regarding the arbitration initiated by Telenor for pre-emptive rights is reached.
VimpelCom, Altimo and Weather Investments II have agreed to give certain undertakings to the Court in order to help ensure that Telenor will receive its pre-emptive shares should the arbitration decision come in Telenor’s favour, and protect Telenor’s voting stake from dilution below 25 per cent plus one share between the closing of the transaction and the outcome of the arbitration proceeding.
If, however,Telenor loses the arbitration claim, the new shares will be issued to Weather Investments II and Telenor’s stake will be diluted, as planned in the revised deal’s terms. However, if Telenor wins the arbitration and participates in the capital increase, Weather Investments II will not get the agreed upon 20.0 per cent economic stake and 30.6 per cent voting rights, which is not in line with the revised offer from Vimpelcom.
"We believe that the deal with Vimpelcom, if completed successfully, would be positive for OT’s shareholders" the report reads "The deal should provide significant support to OT’s financial position amidst the current complications in Algeria and the inability to repatriate cash outside the country since 2009"
Also, the report goes on, the deal should alleviate concerns on OT’s significant holding level debt, worth US$3.3 billion, as a part of it should be refinanced through an inter-company loan from Vimpelcom.
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