VimpelCom Ltd., Russia’s second-largest mobile-phone operator, and Egyptian billionaire Naguib Sawiris agreed to merge their phone assets in a transaction valued at about $6.5 billion.
VimpelCom will own Sawiris’s Weather Investments SpA’s 51.7 percent stake in Egypt’s Orascom Telecom Holding SAE and all of Italian mobile operator Wind Telecomunicazioni SpA. Weather shareholders will get 20 percent of new VimpelCom shares valued at $4.7 billion at current prices and $1.8 billion in cash.
The deal would create the world’s fifth-largest mobile-phone company with a combined subscriber base of more than 174 million customers and give VimpelCom, which has operations in many of the former Soviet republics, access to markets in Africa and the Middle East.
“The next growth in telecoms will come from emerging markets,” VimpelCom Chief Executive Officer Alexander Izosimov said in an interview today in Amsterdam. “The consolidation is just beginning.”
Had the companies combined in 2009, they would have had total revenue of $21.5 billion and earnings before interest, taxes, depreciation and amortization of $9.5 billion.
The new company will have operations in 20 countries and post-transaction net debt up to $24 billion, VimpelCom said in a statement. VimpelCom shareholders will vote on the transaction by year-end and the company expects to complete the deal in the first quarter.
The company expects “the capital structure that we are creating will be cheaper than the one existing today in the assets we are acquiring,” Izosimov said in a conference call with reporters.
VimpelCom shares rose as much as 4.6 percent in New York and traded 2.3 percent lower at $14.38 as of 1:57 p.m. Orascom shares have not traded today.
Weather investments including Orascom’s operations in Egypt and North Korea won’t be part of the new company.
The deal is Sawiris’s second attempt this year to sell assets of Orascom, the largest publicly traded mobile-phone company in the Middle East. Talks with South Africa’s MTN Group Ltd. failed in June. The Algerian government blocked the sale of Orascom’s local unit in the country, saying it would make an offer for the operations.
“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,” Sawiris said in the statement.
Orascom is entangled in a tax dispute in Algeria, which will be dealt with “in due course,” Izosimov said. He and Russian President Dmitry Medvedev will be in Algeria this week.
Orascom in September said that its Algerian unit, Djezzy, received an initial tax reassessment for $230 million for 2008 and 2009, and it will take legal steps to dispute the figure.
VimpelCom, with a listing in New York, was formed from the consolidation of Russian billionaire Mikhail Fridman’s Alfa Group and Norway’s Telenor ASA holdings in Russian and Ukrainian mobile-phone operators.
After the deal, Telenor will hold 31.7 percent of VimpelCom, Alfa’s Altimo unit will control 31.4 percent and minority shareholders will represent 17 percent. Weather will get two of 11 board seats, while Telenor and Altimo will each continue to designate three members.
VimpelCom was advised by UBS AG and Deutsche Bank AG. Citigroup Inc. also advised and provided a fairness opinion to the company’s board. Lazard Ltd., EFG-Hermes and Credit Suisse Group AG advised Weather.