01 November 2011, 16:45 Business

Telenor will not give advice

Kiselev received money to buy Vimpelcom shares from Alfa

The co-owners of Alpha financed the purchase of Vimpelcom shares on behalf of Oleg Kiselev, claims Telenor, the Norwegian shareholder of the mobile operator. If the connection between investors is proven in court, this will change the structure of the deal with Naguib Sawiris: he may be left without representatives on the board of directors of Vimpelcom.

Deputy Chairman of the Board of Rusnano Oleg Kiselev received money to purchase shares of Vimpelcom Ltd (provides communication services in Russia under the Beeline brand) from the co-owners of the Alfa investment group, claims the Norwegian company Telenor, which owns a blocking stake in Vimpelcom. Alfa's participation in the deal makes the purchase "an illegal transfer of shares that violates the Vimpelcom shareholders agreement."

Telenor received facts confirming the involvement of Alpha co-owners in the transaction as part of a trial with the registrar company Sparrowhill, the Norwegian company said in a statement. During the process, it became clear that Sparrowhill Trading, registered in the Virgin Islands and which provided financing to Kiselev’s company Forrielite, is controlled through offshore companies and two individuals by co-owners of Alfa Group Mikhail Fridman , German Khan and Alexey Kuzmichev . Alfa Group did not comment on this, referring the question to Altimo (manages the telecommunications assets of the group, shareholder of Vimpelcom).

Altimo was unable to provide immediate comment, citing an urgent meeting. Previously, the fund denied possible affiliation with Kiselev.

“Telenor has already provided this information to the London Arbitration Tribunal, which is handling the proceedings in Telenor’s case against Altimo and Vimpelcom Ltd. As part of this proceeding, Telenor is trying to prove that during the merger of Vimpelcom and Wind, Telenor had the right to preemptive redemption of Vimpelcom shares in order to not dilute its stake in Vimpelcom ,” Telenor told Gazeta.Ru. In addition, Telenor asks the London Arbitration to take measures to prevent the termination of the shareholder agreement signed by Telenor and Altimo as co-owners of Vimpelcom. “Following Altimo's sale of part of the stake to Sparrowhill, the shareholders' agreement would have been dissolved on December 10th. But Telenor believes that this deal was fictitious and that the shareholder agreement should not be dissolved,” the Norwegian company noted.

In June of this year, Kiselev bought 5.9% of Vimpelcom, paying $108 million for the package. The deal went through his offshore Forrielite. The package was sold by the Altimo investment fund, controlled by Alfa Group. The fund announced that it was going to reduce the voting share in Vimpelcom below 25%, immediately after buying the company of Egyptian businessman Naguib Sawiris Wind Telecom for $6.5 billion.

Norwegian Telenor, another major shareholder of VimpelCom, was against the merger with Wind Telecom, considering the deal too expensive and not fitting into the operator’s development strategy.

The reduction of Altimo's share in Vimpelcom within six months will lead to the termination of the shareholders' agreement with Telenor, concluded in 2009.

Altimo is seeking to terminate the agreement, stating that with the advent of a third co-owner, Sawiris, all shareholders should receive proportional rights. Alfa and Sawiris will have an advantage over Telenor when making decisions on the board of directors.

But in order for the agreement with Telenor to be terminated, the deal to sell part of Altimo's shares must go through with an independent buyer.

Before working at Rusnano, Oleg Kiselev headed the investment group Renaissance Capital in 2004–2005, and in 1989–1992 headed the Alfa-Eco company, which became the basis of Alfa Group.

According to the head of the corporate practice of one of the legal bureaus, the presence of evidence that Kiselev’s purchase was financed by top managers of Alfa Group does not make him affiliated with the group. “Affiliation is determined by other criteria, in particular the presence of the same persons in the management bodies of the company. Financial relations are not a sign,” he says, adding that the prospects for a dispute between Telenor and Alfa will be determined by the shareholders’ agreement.

“It may say that a transaction to reduce the share of one of the shareholders is invalid if it took place between related persons or persons belonging to the same group,” he noted.

Shareholders' shares After the transaction was closed, the number of voting shares of Vimpelcom owned by Altimo (controlled by Mikhail Fridman's Alfa Group) decreased by 13.7%, to 31%; Naguib Sawiris received 30.6% of the votes, temporarily giving up his seats on the Vimpelcom board of directors. Telenor's share of votes decreased by 11% to 25%; minority shareholders own 13.4% of Vimpelcom's votes.

Now, under the terms of the agreement, Altimo and Telenor each nominate three representatives to the board of directors; another three directors are independent, but they have the final say on key issues.

But if the current shareholder agreement is broken, new shareholders will be able to appoint their representatives to the board of directors of Vimpelсom Ltd in proportion to the number of votes.

After the deal with Kiselev, the composition of the new board of directors was not approved. The company has 6 months to do this - the period during which the shareholder agreement continues to be valid after the reduction of Altimo's share.

According to the Vimpelсom charter, the board can have from 7 to 13 people, recalls TKB Capital analyst Kirill Bakhtin . Naguib Sawiris previously announced his intention to introduce three members to the board of directors. Altimo CEO Alexey Reznikovich said that the optimal number of board members is 12. In this case, shareholders can nominate 3 people and another 3 seats remain for independent directors.

The emergence of evidence that the deal with Kiselev was financed by Alfa Group will aggravate the shareholder conflict between Altimo and Telenor. “Investors perceive the presence of a corporate conflict between major shareholders negatively. But for Vimpelсom this risk existed for many years. Therefore, the worsening conflict is already taken into account by investors. From the point of view of current activities, the conflict should not affect the company,” says Bakhtin.