Scandinavian holding Company Telia announced that it has sold the remaining 19% of MegaFon to Gazprombank for RUB 60.4 billion, share price for the transaction was 514 RUB per share with discount of about 10% to the closing price of trading on the Moscow Exchange on Monday. BofA Merrill Lynch, CitiGroup and Morgan Stanley helped organize the deal, legal support was provided by White & Case and Houthoff.
Despite the fact that Gazprombank is under sanctions from the European Union and the United States, the transaction does not violate the sanctions regime, as it is not tied to the financing activities of the Bank, said Telia.
Gazprombank appreciates the potential of MegaFon share price growth “as one of the most dynamically developing companies in the Telecom sector and expects to further strengthen its market position due to strong operating performance and additional growth points, including the development of new banking products”, commented the new shareholder. The Bank assured that it will be able together with other co-owners of the operator to develop a unified approach to long-term development strategy of “MegaFon” and mechanisms for its successful implementation.
Controlling shareholder of “MegaFon” – USM group will do anything to keep Gazprombank as strategic investor operator, said Ivan Streshinsky. His statement quoted by “Interfax” with reference to the press service of the group. According to him, in USM believes that the group and Gazprombank have common vision of the future and the strategic goals for the operator.
At the opening of trading session on the Moscow Stock Exchange “MegaFon” quotes declined by 4.9%, then after 15 minutes the drop has continued. By 10.15 GMT the shares of the operator dropped 0.35% to 10.40 Moscow time the decline was 0,61% (567,4 RUB over the paper).
The President and CEO of the holding Johan Dennelind reminded that Telia was one of the founders of “MegaFon” and actively participated in the success story of a Russian operator. He called “MegaFon” one of the mobile and digital leaders in Russia. To part with this asset Swedish-Finnish shareholders have decided in accordance with the new strategy, according to which it plans to focus on development in the Baltic States and Scandinavia. Mr. Dennelind confirmed the existence of a new strategy after the publications of mass media about the holding plans to sell a package in “the MegaFon” in its entirety.
Understanding, how will the arrival of “MegaFon” new shareholder is not clear yet, because it is not clear what Gazprombank will continue to do with this package, says the analyst of “URALSIB” Konstantin Belov. Buying a large package for the impressive amount of 60 billion rubles in the operating company – is still unusual for a commercial Bank, he said. Although there are examples of such investments in the Russian Telecom – for example, participation of VTB in the “T2 RTK holding” (brand Теle2) – it is possible that the Gazprombank will be the intermediate owner and partially or completely pull out of the deal.
Discount to the market value of MegaFon as part of the deal with Gazprombank is about 9.5–10.5%, which corresponds to the interest rate for the year when lending. Meanwhile, given the presence of the majority shareholder USM and peculiarities of Russian corporate law, the transaction does not give the Bank the opportunity to exert significant influence on strategy and operations of MegaFon.
At the beginning of October Telia Company sold on the stock exchange 6.2% stake in MegaFon for 585 RUB per share. The company was originally going to sell only 5,65% of the shares, but the demand was greater. Telia had announced that it had received 22,522 billion rubles, or about $390 million for this package. Before this deal Telia had 25.17% stake in MegaFon, the other shareholders of the Operator Group are: Alisher Usmanov’s USM (56,32%), MICL (the Cyprus “daughter” of the “MegaFon”, 3.92%), free float at the beginning of October was to 14.59% of the shares.
Norwegian operator Telenor is also gradually exitting from Veon (Beeline), the parent company of another Russian operator VimpelCom. The sale ended on 25 September and Telenor will remain the owber of 14.6% stake in Veon.
In the 90s investors from developed markets invested in Russian telecom assets due to the immence growth, which on their own developed markets had been much lower. Now the speed of growth of the Russian Telecom and other emerging markets has come close the growth of developped markets and operators see slowdown in revenue growth.