Fridman Faces Africa Setback After Failed Bid in Russia

Russian billionaire Mikhail Fridman suffered a second setback this year for an effort to expand his telecommunications empire as his bid for Orascom Telecom Holding SAE failed to win support.

An offer of as much as $1.8 billion by Fridman’s Altimo for full control of Egypt’s Orascom failed after holders of 16 percent of the shares accepted it by yesterday’s deadline. Altimo, whose carrier VimpelCom Ltd. already owns about 52 percent of Orascom, sought to buy the remaining 48 percent.

The result hinders Fridman’s bid to consolidate his phone assets in Africa and Asia and puts pressure on him to boost his offer. Fridman reaching control of 75 percent of Cairo-based Orascom would pave the way for him to delist the carrier and fully combine it with VimpelCom, reducing costs, according to Alexander Kazbegi, a Renaissance Capital analyst.

This is the second failure for Fridman and his partners since they received $14 billion in March from selling shares in oil company TNK-BP to a state-controlled producer. That same month, Fridman’s company made an unsuccessful $4 billion offer for Tele2 AB’s Russian wireless unit, seeking to trump its acquisition by Russian state lender VTB Group.

Orascom surged 5.7 percent to 4.83 Egyptian pounds at the close in Cairo, the highest price since September 2008, valuing the company at about $3.6 billion. Altimo’s offer was 70 cents per Cairo-listed share or $3.5 per global depository share. The company’s London-traded GDRs rose 8.2 percent to $3.375, set for the biggest gain in 11 months.

Seeking Growth

VimpelCom acquired Orascom, which operates in Algeria, Pakistan and Bangladesh, from Egyptian billionaire Naguib Sawiris two years ago and still has an Orascom office in Egypt, where it is traded and has no operations. As a result of that deal, VimpelCom is now the world’s seventh-largest wireless carrier and has $28.6 billion debt.

Still, growth at VimpelCom is slowing, with the company reporting no increase in revenue for the first three months of this year. That’s driving Fridman to chase deals such as Tele2 Russia, which would have given him control of the fourth-largest mobile operator in an expanding market, and Orascom, which is adding subscribers in regions including sub-Saharan Africa.

VimpelCom is following other European wireless carriers making deals in Africa. Last year, France Telecom SA struck a $2 billion deal to raise its stake in its Mobinil venture in Egypt, the Arab world’s most populous country.

Algeria Dispute

“The acceptance rate of Altimo’s Orascom shows the price wasn’t generous enough for shareholders,” Ahmed Adel, an analyst at Cairo-based Naeem Brokerage, said by phone. “The rejected offer price sets a bottom line for future offers.”

Orascom’s board had recommended that shareholders reject the offer as too low. The offer undervalued the business by as much as 36 percent, especially if the company avoids a $1.3 billion fine in Algeria by reaching a resolution to an ownership dispute over its local unit with the government, Orascom’s valuation adviser said last month.

Altimo made its bid through its Baskindale Ltd. unit, which is now banned from making another offer for Orascom Telecom for six months, according to Egyptian Financial Supervisory Authority regulations. Altimo said last week it won’t raise its offer price.

Delisting Bid?

Altimo said yesterday it will apply for permission from EFSA to buy the 16 percent of shares tendered even as the amount didn’t reach the minimum sought. EFSA Chairman Ashraf El Sharkawy couldn’t be reached for comment.

Should Altimo obtain the 16 percent, the stake controlled by it and VimpelCom combined would be about 68 percent. That might be enough to prompt Fridman to attempt to delist Orascom, said Renaissance’s Kazbegi, who is based in Moscow. While 75 percent support is needed for such a move to pass in a shareholder meeting, Fridman’s stake may be large enough as some shareholders normally skip meetings, Kazbegi said.

Altimo Vice President Evgeny Dumalkin declined to comment on any delisting plan. Orascom’s investor relations head Mamdouh Abdel Wahab declined to comment on the tender offer.

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