VimpelCom Amends Merger Agreement with Wind Telecom
Russia's VimpelCom has announced an amended agreement to buy Wind Telecom (formerly Weather Investments) from Egypt's Naguib Sawiris. The agreement was approved by six of VimpelCom's nine directors, with the three Telenor-nominated directors voting against, as they had previously said they would.
The changed merger terms also include a revenue sharing clause covering Orascom Telecom's Algerian subsidiary, which the Algerian government is currently trying to nationalise.
Following completion of the Transaction, VimpelCom will own, through Wind Telecom, 51.7% of Orascom Telecom and 100% of Wind Italy. 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.
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."
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 said that it is interested in exploring with the Algerian Government a resolution which would allow VimpelCom to retain ownership of OTA.
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 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 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.
Following the 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 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.