Old tricks, open war

17 January 2011 By Una Galani Follow @ugalani

The Norwegian telco faces another foreign disaster after the Russian group resurrected old tricks to force through its $6 blnplus purchase of Wind from Egypt’s Naguib Sawiris. Telenor is right that the terms look poor for Vimpelcom, but its chance of thwarting the deal are slim.

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Telenor said on Jan. 17 that it would try to block the revised acquisition of Wind Telecom by Russia's Vimpelcom as it believes the deal does not make sense and will harm minority shareholders.

"We see this as an obvious deception that violates the Vimpelcom shareholders agreement," said Telenor.

Vimpelcom said that six directors, including three nominated by Russia's Altimo and three independent directors, voted in favour of the transaction. The three Telenor representatives on Vimpelcom's board voted against the deal.

Under the new terms, Vimpelcom will issue 325.6 million new common shares, 305 million new convertible preferred shares and pay $1.5 billion in cash to Wind's controlling shareholder, Egyptian tycoon Naguib Sawiris. In return, Vimpelcom will receive 100 percent of Italy's Wind and 51.7 percent of Orascom Telecom.

The transaction will give Sawiris a 20 percent economic interest and a 30.6 percent voting stake in the enlarged Vimpelcom.

The new deal also includes a provision to share any financial losses or gains with Sawaris relating to the potential nationalisation of Algerian unit Djezzy, the crown jewel of Orascom Telecom, Wind's listed subsidiary.

Vimpelcom had originally planned to issue 325.6 million common shares, no preference shares and pay Sawiris $1.8 billion in a deal with a total value of $6.6 billion.

The issue of new shares requires the approval by a majority of shareholders. Vimpelcom said it expects to complete the deal in the second quarter.

Shares in Telenor fell 2.9 percent to 90.1 Norwegian crowns by 9:38 GMT following the announcements.

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