VimpelCom and Telenor still appear to be at loggerheads over the former’s acquisition of the newly renamed Wind Telecom (previously known as Weather Investments), if official statements issued by the two operators are to be believed.
VimpelCom’s release confirming that its board has approved the proposal elicited a rapid response from Telenor, which declared the Norwegian firm’s intention to “stop the acquisition from being completed.”
Telenor has apparently taken exception to the disproportionate economic and voting rights that would be ascribed to Wind Telecom under the proposal. If the deal goes through, it would leave Telenor with a 31.7% economic stake and a 25% voting interest; Wind Telecom’s shareholders meanwhile would enjoy a 30.6% voting stake despite their lower economic interest of 20%.
Dag Melgaard, spokesman for the Norwegian firm, stated: “We did not support the original proposal because it did not make strategic or financial sense. The revised proposal makes even less sense as the consideration now being offered is even more generous to the owners of Wind Telecom.”
Telenor is attempting to alert other VimpelCom shareholders to the potential ramifications of this disparity, claiming that “in our view, the disconnect between economic and voting stakes negatively affects the attractiveness of VimpelCom as an investment case for public investors.”
The Norwegian firm has also inferred that legal technicalities have been exploited in order stifle its objections to the deal. VimpelCom’s shareholder agreement grants Telenor pre-emptive rights which would have been in full effect if the acquisition qualified as “unrelated M&A” – which it initially did.
However, Telenor has hit out against the use of “an artificial construct aimed at depriving Telenor of its pre-emptive rights” following the acquisition of 0.7% of Wind’s Orascom Telecom Holding branch by Gleb Fetisov, a minority shareholder in Altimo (the telecoms investment arm of major VimpelCom shareholder Alfa Group). This changed the status of the deal to a “related party” transaction, thereby waiving Telenor’s pre-emptive rights.
The deal has high-profile detractors elsewhere, with the Algerian government disputing ownership over Orascom’s Algerian operations. VimpelCom has stated that it is is “interested in exploring with the Algerian government a resolution which would allow VimpelCom to retain Orascom Telecom Algeria following completion of the transaction.”
A possible alternative to this would be an agreement with Weather which “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.”