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VimpelCom – Weather merger approved by board despite Telenor objection

The board of VimpelCom has approved the proposed merger with Weather Investments, the parent company of Egypt’s Orascom. Two thirds of the nine board members voted in favour of the deal, with opposition coming from the three representatives of Norwegian firm Telenor.

The terms of the deal will likely be altered to appease Telenor; the firm declared its opposition to the deal shortly before the vote took place, stating that the merger was “not in the best interests of VimpelCom shareholders and therefore [Telenor] does not intend to support the transaction.”

Telenor is VimpelCom’s second-largest shareholder after Alfa Group, which also has three members on the board; they joined the three representatives of minority shareholders in voting in favour of the deal.

Despite the majority vote, VimpelCom has stated that “no agreement has been reached with respect to the shareholder related agreements that were contemplated to be entered into in connection with the transaction”, with the board agreeing that VimpelCom CEO Alexander Izosimov must “negotiate further with Weather the terms and conditions under which Weather would be willing to enter into a revised transaction.”

The terms for the US$6.5 billion merger could therefore deviate significantly from the original proposal, possibly as a means of assuaging Telenor’s concerns. The original terms would have lowered the holdings of the existing shareholders by granting Weather 19% of voting rights and a cash consideration of US$1.8 billion.

However, it is believed that Telenor is more concerned by the fact that VimpelCom would assume much of Weather’s existing debt if the deal closes; this could therefore mean that any revenue that Weather’s assets generate after the merger would be spent on reducing the debt.

Telenor spokesman Dag Melgaard stated: "We strongly support VimpelCom's expansion in accordance with the principles agreed at the time [the new VimpelCom Ltd.] was created. However, in our capacity as a shareholder of VimpelCom Ltd., we do not believe this transaction makes strategic or financial sense for VimpelCom's shareholders."

The Norwegian firm has stated that it will not change its stance on the deal until it knows the updated terms of the deal.

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