Telenor in disagreement over VimpelCom-Wind deal

Telenor and VimpelCom are still slugging it out over the Russian player’s proposed acquisition of Wind Telecom, part of Egyptian billionaire Naguib Sawiris’ Weather Investments vehicle and owner of Orascom.

On Monday, as VimpelCom’s supervisory board gave its final approval for a merger with Wind, Telenor said that it will try to stop the transaction from being completed.

Should the deal go ahead, VimpelCom will own, through Wind Telecom, 51.7 per cent of Orascom Telecom and 100 per cent of Wind Italy, creating the world’s sixth largest mobile carrier by subscribers. The enlarged company would operate in 19 countries with over 173 million mobile subscribers.

VimpelCom has called a shareholder meeting for March 17 to consider the approval of the deal, which would give the owners of Wind Telecom a 30.6 per cent voting stake in VimpelCom.

But Telenor’s three nominees on the VimpelCom board have voted against the approval of the acquisition because they do not believe it makes strategic or financial sense for VimpelCom and will harm VimpelCom’s shareholders. Telenor holds a 36 per cent voting and 39.6 per cent economic interest in VimpelCom.

“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. Existing VimpelCom shareholders face considerable additional dilution if this acquisition is completed on the terms approved by the board,” said Telenor spokesman Dag Melgaard.

“As a result of this transaction, VimpelCom minority shareholders’ existing 18.6 per cent voting stake will be diluted to 12.9 per cent, despite their having an economic stake of 16.3 per cent.  In our view, the disconnect between economic and voting stakes negatively affects the attractiveness of VimpelCom as an investment case for public investors,” Melgaard said.