[the africa report] Telecoms group Vimpelcom said it was to pay $6.6 billion to buy Italian group Wind and control of Egyptian operator Orascom Telecom, and wanted a deal with Algeria to keep its Djezzy unit.
Monday's deal with Egyptian tycoon Naguib Sawiris marked a major expansion into Asia and North Africa and a first move to the developed European market for emerging market specialist Vimplecom, part owned by Russian billionaire Mikhail Fridman. The cash and shares deal will create the world's fifth-largest mobile operator, worth around $23 billion and with 174 million mobile subscribers.
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 told a conference call it was a "highly unlikely scenario" that Vimpelcom would lose Djezzy to an Algerian government which wants to nationalise it. Izosimov will travel to Algeria as part of a delegation by Russia's president, Dmitry Medvedev, this week. 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 2.3 percent by 1740 GMT on what a Moscow-based trader said were risks surrounding the Algerian deal.
OUTSTANDING ISSUES
Norwegian group Telenor, whose economic stake in the enlarged Vimpelcom will 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 African company 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 hoped Medvedev's visit on October 6 could help ensure the lucrative business was not stripped out after a deal is 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 telecoms firms, a goal its Egyptian tycoon owner, Naguib Sawiris, has talked about since 2006. Orascom's London-listed global depositary receipts (GDRs) rose 7.3 percent. Vimpelcom said it would raise $2.0-$2.5 billion of debt, taking the total burden of the combined group to $24 billion. Upon completion of the deal, Russian Alfa-Group will have 31.4 percent of economic rights in Vimpelcom, and minority shareholders will represent 17.0 percent.
Vimpelcom in $6.6 bln deal to buy Orascom, Wind
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