Scenarios: Telenor's bid to scupper Vimpelcom-Sawiris deal

MOSCOW/OSLO Thu Feb 17, 2011 8:36am EST

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MOSCOW/OSLO (Reuters) - Norwegian group Telenor is pursuing a court injunction which could derail Russian company Vimpelcom's planned $6+ billion purchase of Egyptian tycoon Naguib Sawiris's Wind Telecom.

Russian billionaire Mikhail Fridman's Alfa-Group, the other main owner of Vimpelcom, backs the deal, which would make the Russian operator one of the world's biggest by giving it control of Egyptian group Orascom Telecom and Wind Italy.

Telenor has said the cash and shares Wind Telecom deal does not make financial or strategic sense, would dilute its stake in Vimpelcom, and effectively hand control of Vimpelcom to Fridman and Sawiris.

A London court hearing on February 25 will be crucial, analysts said. Following are details about the litigation and its potential impact:

LITIGATION

* The Commercial Court in London will hear Telenor's application for an injunction on February 25, while a separate London-based arbitration tribunal -- a private legal method not decided in public courts -- is to decide whether Telenor should be allowed to take part in a share issue envisaged for Sawiris.

* An injunction would force Vimpelcom to put enough new shares in an escrow account to enable Telenor to keep its voting rights in the event of a share issue to Sawiris.

* If Telenor wins the arbitration tribunal ruling, it would have the right to take the escrow shares and pay Vimpelcom -- a sum Telenor has said was about 15 billion crowns ($2.6 billion).

* If Telenor loses arbitration, the shares would go back to Vimpelcom where they could be annulled.

* The court will rule whether it agrees with Telenor that by not putting shares in an escrow account, Vimpelcom risks damaging Telenor's interests were the Norwegian group to eventually win arbitration which may drag on for months. The court may agree with Vimpelcom that the injunction would damage the deal and deny the injunction request.

* Alfa-Group's telecoms arm Altimo has offered expedited arbitration, saying it would allow the arbitration tribunal's decision to be known by March 7, before a Vimpelcome shareholder meeting on Wind Telecom and meaning there would be no need for the injunction.

* Vimpelcom has called a shareholder meeting to vote on Wind Telecom on March 17. More than 70 percent of independent shareholders would have to back Telenor to block the deal.

INJUNCTION DENIED

If the court does not grant the injunction, Vimpelcom will likely go ahead with the shareholder meeting and, analysts say, have a good chance of getting the deal approved.

If Telenor also loses the arbitration case, the Sawiris deal will likely make it lose influence over time.

"If we lose the injunction, the deal will probably go straight to the investor meeting where it may be voted through," Telenor chief executive Jon Fredrik Baksaas has said, adding: "We are a shareholder in Vimpelcom and whether we remain (if the deal goes ahead) is a question that remains to be considered."

INJUNCTION GRANTED

If the court grants an injunction to Telenor, Vimpelcom is expected to postpone the shareholder meeting and try to renegotiate the deal with Sawiris or drop it altogether.

Moscow brokerage Troika Dialog said Vimpelcom being required to issue additional shares "would change the nature of the deal and might require the supervisory board to postpone the shareholder meeting or even abandon the transaction."

Orascom Telecom chief executive Khaled Bichara was quoted as saying on Wednesday its parent company would call off the deal with Vimpelcom if Telenor blocked the vote on the tie-up on March 17.

OUT OF COURT DEAL

Some analysts said Telenor and Vimpelcom may yet reach an out of court compromise to allow Telenor to keep its voting stake and the Sawiris deal to go through.

With Telenor ready to inject $2.6 billion to keep its Vimpelcom stake unchanged, that money could be used by the Russian operator to boost the cash component of the Sawiris deal. That compromise would not be popular with Altimo, whose stake would be diluted unless it too paid up.

"It is easier to reconcile this time than their previous battles," said Espen Torgersen, an analyst at brokerage Carnegie in Oslo, referring to years of litigation between Telenor and Alfa-Group which ended in 2009 with the creation of Vimpelcom.

(With additional reporting by Joachim Dagenborg in Oslo and Victoria Howley and Nicola Leske in Barcelona; Editing by Dan Lalor)

($1 = 5.826 Norwegian crowns)

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