Telenor wants Vimpelcom shares put in escrow

Norwegian operator Telenor is suffering deja vu in its business relationship with Russian mobile network Vimpelcom, of which it owns 39.6 percent. Telenor said it will seek for interim injunctive relief and proposes placing its shares under escrow as part of its current arbitration against Vimpelcom, Altimo Holdings & Investments Ltd. and Altimo Cooperatief U.A.

Vimpelcom is seeking to acquire Wind Telecom, formerly known as Weather Investments. Naguib Sawiris, an Egyptian business man, and his family owns 97 percent of Wind Telecom after buying out the Italian operator a couple of years ago with the  holding Weather Investments.

The end of last month, Telenor started arbitration proceedings against both Vimpelcom and Altimo, asking a tribunal to decide if the entire deal is an unrelated or related party merger.

Telenor is currently in arbitration asking that Vimpelcom be ordered to issue to Telenor its pre-emptive rights shares should Vimpelcom actually acquire Wind Telecom and shares be handed out to its shareholders.

Telenor proposed its shares be put in escrow until the arbitration tribunal has decided if the takeover is an unrelated or related party M&A (merger and acquisition). Should the tribunal agree with Telenor, the shares shall be handed back to Telenor, whilst Vimpelcom will receive the purchase price. If the tribunal however decides the takeover is indeed a related party transaction, then Vimpelcom will get the shares back and the money goes into Telenor’s treasure trove.

In December last year, Telenor claimed it didn’t believe the acquisition would make any strategic or financial sense for VimpelCom’s shareholders. The Norwegian telco talked about its angst on January 17 this year, stating “the new shares will give the owners of Wind Telecom a 30.6 percent voting stake in VimpelCom, representing 1.53 times the 20 percent economic stake the owners of Wind Telecom stand to receive”.

In contrast, Telenor has a 36 percent voting interest, while owning 39.6 percent of Vimpelcom. As could be expected, the three company representatives in Vimpelcom’s board voted against the acquisition of Wind Telecom. Telenor told Vimpelcom’s management it would not waive its pre-emptive rights so as not to dilute its stake.

Yet Altimo, an investment partner in Vimpelcom, turned the situation from an unrelated M&A into a related party acquisition by buying 0.7 percent of Wind Telecom’s majority-owned subsidiary Orascom. Altimo claims this deprives Telenor from its pre-emptive right to say no, under the Vimpelcom shareholder’s agreement. What a jumble!