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Vimpelcom in $6.6 billion deal to buy Orascom, Wind

MOSCOW/CAIRO (Reuters) - Russian mobile operator Vimpelcom VIP.N will buy Italian mobile group Wind and control of Egyptian operator Orascom Telecom ORTE.CA for $6.6 billion, and seek a deal with Algeria to keep Orascom's Djezzy unit.

The cash and shares deal, with Egyptian tycoon Naguib Sawiris’ Weather Investments, will create the world’s fifth-largest mobile operator, worth around $23 billion and with 174 million mobile subscribers.

For Vimplecom, an emerging market specialist partly owned by Russian billionaire Mikhail Fridman, the transaction marks a major expansion into Asia and North Africa and a first move into the developed European market.

Vimpelcom Chief Executive Alexander Izosimov told Reuters Insider Television the fate of Orascom’s Algerian unit, Djezzy, its biggest single source of revenue, had yet to be decided.

“We had to accept that risk (around Djezzy). But we are absolutely open to a deal with the Algerian government and propose to them to resolve it somehow amicably. We believe it will be a fair process and we will find a solution,” he said in an interview in Amsterdam.

He later said on a conference call that it was a “highly unlikely scenario” that Vimpelcom would lose Djezzy to an Algerian government that wants to nationalise it.

Izosimov will travel this week to Algeria as part of a delegation led by Russia’s president, Dmitry Medvedev.

Sawiris, chairman of the Weather investment group, said he expected the visit to have a positive impact on Djezzy's operating conditions, adding that the value in a previous "discounted" offer for Djezzy from South Africa's MTN MTNJ.J of $7.8 billion still held.

“I’m sure he’s (Medvedev) going to raise the subject and he’s going to try and help improve the circumstances under which Djezzy operates,” Sawiris said in a phone interview.

While Orascom’s operations in Egypt and North Korea were included in the deal, the assets will be demerged in the third quarter of 2011, Vimpelcom said. Wind’s Greek unit is not included in the deal.

It was the biggest international deal by a Russian company -- the previous record of $5.9 billion was set when metals and mining company Norilsk Nickel bought LionOre Mining.

Vimpelcom’s NYSE-listed stock was down 2.2 percent in late trade on Monday on what a Moscow-based trader said were risks surrounding the Algerian deal.

OUTSTANDING ISSUES

Upon completion of the deal, Russian Alfa-Group would have 31.4 percent of economic rights in Vimpelcom, and minority shareholders would have 17 percent.

Alfa said it was “committed to finalize it (the deal) in due terms.”

Norwegian group Telenor TEL.OL, whose economic stake in the enlarged Vimpelcom would fall to 31.7 percent from 39.6 percent, said it would give final approval if certain conditions were met.

“There are a few conditions to closing this deal. One is approval from regulatory authorities in some markets and another is a final shareholders’ agreement between all three parties -- and presumably the Weather shareholders,” spokesman Dag Malgaard told Reuters.

Telenor has voiced concerns the deal will weaken dividend payouts. Its shares closed down 1.7 percent.

Algiera, which rejected Orascom’s plans to sell Djezzy to South Africa’s MTN, has been trying to nationalise the unit and was expected to make an offer in coming months.

Algerian law gives the government the right to block any sale of Djezzy to Vimplecom, but analysts said Medvedev’s visit on October 6 could help ensure the lucrative business was not stripped out after a deal was done.

The deal would help Orascom’s holding company lighten its debt burden and become a player in the one of world’s top five telecommunications companies, a goal Sawiris has talked about since 2006.

Sawiris said Orascom would be split into two separate stocks listed on Egypt’s bourse in order to demerge the company’s Egyptian and North Korean assets.

Orascom's London-listed global depositary receipts (GDRs) ORTEq.L rose 7.3 percent.

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