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Articles & publications
07.05.2010
Putin signs resolution on divesting Svyazinvest’s stake in MGTS under a transaction with AFK SistemaInterfax
RF Prime Minister Vladimir Putin has signed the resolution on divesting the 23.3% stake in Moscow City Telephone Network (MGTS) owned by Svyazinvest as part of a transaction with AFK Sistema (RTS: AFKS).
The resolution, signed on May 5, is posted on the official website of the government of the Russian Federation.
According to the document, the MGTS stake is to be exchanged for a 50% equity position in Sky Link, owned by Sistema Inventure (wholly owned by AFK Sistema), with additional payment not less than the market price determined on the basis of a report by the independent appraiser”.
The transaction could be executed on the condition that MS-Direct (a subsidiary of Sky Link) is able to accumulate the other 50% stake in Sky Link, the resolution points out.
As reported earlier, Sistema in April increased its beneficial stake in Sky Link to 100% as a result of MS-Direct’s acquisition of 50% of the operator from RTDC holding.
Ernst & Young appraised the value of a 23% stake in MGTS at RUR 9.7 bln, and 100% of Sky Link at RUR 9.4 bln. As a result, should make an additional payment of RUR 300 mln to the holding.
Aside from the government resolution, to sell the MGTS stake in will be necessary to obtain a resolution from the shareholders meeting of Svyazinvest. No date has yet been set for the meeting.
The exchange of Sky Link for MGTS is part of an asset swap between the state and AFK Sistema, as a result of which the Russian government is set to regain its status as the sole owner of Svyazinvest, whereas Vladimir Evtushenkov’s holding will eliminate its debt to Sberbank (RTS: SBER) and a large minority shareholders in MGTS.
The original transaction provided for Comstar-UTS (subsidiary of Sistema) to turn over its blocking stake in Svyazinvest (25% + 1 share) to Vnesheconombank (VEB). In turn, VEB will take over Comstar-UTS’s RUR 26 bln debt to Sberbank which was used to secure the blocking stake in Svyazinvest. The state holding, in turn, will hand over to Sistema its 23.3% stake (28% of the voting shares) in MGTS in exchange for a 100% stake in the equity of Sky Link.
Ernst & Young appraised the value of a blocking stake in Svyazinvest at RUR 26 bln.
In February Svyazinvest announced the structure of the asset swap, in which Rostelecom (RTS: RTKM) would act as the purchaser of the blocking stake in Svyazinvest rather than Vnesheconombank. Rostelecom could buy back the Svyazinvest stake from Comstar, refinance the transaction by issuing bonds, while Comstar-UTS would use the proceeds from Rostelecom to pay off its debt to Sberbank.
At the end of April, Rostelecom announced a public tender to raise credit lines worth RUR 30 mln, which would then be used for refinancing by issuing bonds.
All agreement pertaining to the asset swap are expected to be signed by the end of the first half of 2010, since, under the terms of the legislation, the appraisal of the assets is valid only until the end of the first six months of the year.
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