Vimpelcom goes global with $6 billion Wind deal

AMSTERDAM/MOSCOW Thu Mar 17, 2011 2:25pm EDT

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AMSTERDAM/MOSCOW (Reuters) - Vimpelcom won a long-running battle for control of Wind Telecom when shareholders voted for a deal to diversify into new markets and take on huge debt.

The more than $6 billion cash-and-shares bid for control of emerging markets specialist Orascom Telecom and Italian group Wind was backed by 53.3 percent of Vimpelcom's voting shares, the Russian mobile phone group said on Thursday.

"It is a good transaction, it is a growth plan. I have been with the company for 12 years. We started with GSM in Moscow and today we became a global player," chairman Jo Lunder told reporters.

Chief Executive Alexander Izosimov said he expected the deal to complete in the first half, subject to financing.

Vimpelcom has already received regulatory approval from Ukraine, Pakistan and Italy, the only countries where this was a necessary condition for the closing of the deal, spokeswoman Elena Prokhorova said.

The deal had been opposed by Norwegian group Telenor, which has a 36 percent voting stake and fought a battle with fellow major Vimpelcom shareholder Alfa Group to have it blocked.

In the event more than 60 percent of minor shareholders voted against the deal, which analysts say will hamper growth thanks to the $20 billion of debt, but the opposition was not enough to overcome Alfa Group and its supporters.

Telenor shares rose more than 2 percent after news it lost the vote at a specially convened meeting in Amsterdam, with analysts saying the company would benefit from a resolution to the conflict.

The shares were up 1.7 percent at 1342 GMT, having shed 8.5 percent in the year to date.

"It is a relief that it is over," said Tore Toenseth, analyst at Argo Securities.

"The shareholder conflict is settled, the transaction will be completed and now it is back to basics with the focus returning to operations. That is what is needed for both Vimpelcom and Telenor shares to start climbing again."

Lunder said relations between Vimpelcom's shareholders could be improved. "I think we will rebuild the relationship with Telenor."

BETTER OFF

Telenor, which claimed the deal made no strategic or financial sense, said it remained committed to Vimpelcom, Russia's third biggest mobile company, but would pursue arbitration proceedings in an effort to avoid dilution of its stake as a result of the deal.

"Even though we believe Vimpelcom would have been better off without this deal, we will now continue to work in the best interests of Vimpelcom and its shareholders," Telenor spokesman Dag Melgaard said.

Analysts said the news should also have a positive effect on Vimpelcom shares as it ends a period of uncertainty.

Konstantin Chernyshev, an analyst at Uralsib, said although the deal is likely to be dilutive for minority shareholders in the long run and the heavy debt load may hamper future growth, the U.S.-listed shares were still a "buy."

"VimpelCom is fundamentally undervalued, even accounting for the negative effect of the deal," he said.

Telenor and Alfa's voting stakes will fall to 25 percent and 31 percent from 36 percent and 44.7 percent respectively, after an issue of 326 million common shares and 305 million preferred shares to Wind Telecom's owner, Egyptian tycoon Naguib Sawiris.

"We remain confident that we will prevail in the arbitration and that our pre-emptive rights will be properly reinstated," said Telenor's Melgaard.

(Additional reporting by Wojciech Moskwa in Oslo; Writing by Maria Kiselyova; Editing by David Cowell and Will Waterman)

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