Russia’s VimpelCom Confirms Merger with Orascom [Updated]

Russia’s VimpleCom has reportedly offered a lucrative sum, said to be as high as USD 6.8 billion, to Naguib Sawiris to get hold of controlling stakes in Orascom Telecom.

Reports say that possible deal may end up in a merger of both telecom companies, in addition, VimpleCom will acquire 51 percent controlling stakes in Orascom.

This is Naguib’s second attempt in this quarter to sell off Orascom’s shares. Earlier, deal with MTN couldn’t close due to disputed fate of Djezzy, group’s highest revenue generating arm in Algeria.

Russian Media and Bloomberg said that deal would include Orascom’s African and Asian operations along with Italy’s Wind communication, however, it is not cent percent clear if Algerian network will be part of deal or not.

At the same time, reports said that Russian President Dmitry Medvedev’s is likely to visit Algeria this week to engage Algerian Government over the deal.

It merits mentioning here that Russia enjoys healthy relations with Algeria as compared to South Africa or Egypt.

Orascom and Vimplecom both declined to comment on the said reports [We have confirmations now, see below update] .

An earlier bid to sell most of OT’s non-Egyptian units to South Africa’s MTN Group fell apart largely because of a dispute between the firm and Algeria over some $600 million in back taxes owed by Djezzy. Algeria had blocked the deal, saying it had the first option to buy the Algerian subsidiary. The country, however, has yet to move on that purchase.

Complicating matters for OT is a new tax claim by Algeria, an issue which may be eased with Russian President Dmitry Medvedev’s visit to the North African nation this week.

Algerian authorities last week handed OT a new notification about a $230 million tax reassessment for 2008 and 2009.

It is interesting to mention here that VimpelCom is jointly owned by Russia’s Alfa Group and Norway’s Telenor.

Update:

We have confirmations now, from VimpleCom and Orascom, that the deal is almost closed between the two parties.

Under the terms of the deal, VimpelCom will own – through Weather – 51.7% of Orascom Telecom Holding and 100% of Wind Italy.

Under the terms of the Transaction, Weather shareholders, largely Naguib Sawiris, will contribute to VimpelCom their shares in Weather in exchange for a consideration consisting of newly issued VimpelCom common shares, US$1.8 billion in cash and certain assets that will be demerged from Orascom Telecom and from Wind Italy.

Orascom Telecom’s investments in Egypt and North Korea, will be transferred to the current Weather shareholders and wont be part of the deal. Wind Hellas Telecommunications in Greece is entirely excluded from the transaction.

The VimpelCom shares issued to Weather shareholders at the closing of the Transaction will represent a 20% economic interest and a 18.5% voting interest in the enlarged VimpelCom group.

The deal is valued at around US$6.8 billion in stock and cash.

Upon issuance of the new VimpelCom shares, Telenor and Altimo will hold 31.7% and 31.4% of the economic rights and 29.3% and 36.4% of the voting rights, respectively, of VimpelCom. Minority shareholders in VimpelCom will represent 17% of the economic rights and 15.7% of the voting rights.

It is intended that Weather will designate two members to an enlarged VimpelCom board of eleven members, while Telenor and Altimo will each continue to designate three board members. Three board members will continue to be unaffiliated with any major shareholder.

Naguib Sawiris, the Chairman of Weather, commented:

“This landmark transaction is a true reflection of the high quality of our Orascom Telecom and Wind Italy assets and of the significant value that we have created over the years for our shareholders. We share a common vision with our new partners at VimpelCom of the exciting prospects of our new, enlarged and diversified telecoms platform.

Moreover, I am confident that our minority shareholders in Orascom Telecom will benefit from the synergies created by the combination of the two entities, especially in the area of procurement, and by the overall strengthening and de-risking of the Orascom Telecom balance sheet. I am looking forward to being fully involved in the new group and to joining VimpelCom’s Supervisory Board.”

Via [AP, Bloomberg, WSJ and Cellular News]

Update: We have more details of merger between VimpleCom and Orascom here: Insight of VimpleCom / Orascom Merger