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Articles & publications
27.05.2010
Kenneth Dart on boardVedomosti, Igor Tsukanov
A large minority – Kenneth Dart – has emerged among the shareholders of the regional telecommunications companies (RTOs) of Svyazinvest that will soon be asked to address the Rostelecom merger issue. Despite his reputation as a “vulture capitalist”, he is known to support the reorganization of Svyazinvest.
Funds under the administration of Dart Management own about 7% of the shares in one RTO, i.e. Far East Telecom, according to a source at Svyazinvest and two managers close to the minority shareholders of the Far East RTO. Yesterday, this information was confirmed by the general director of Svyazinvest, Evgeny Yurchenko: Dart Management holds large minority stakes in Far East Telecom, as well as Southern Telecommunications Company, North-West Telecom and VolgaTelecom.
Kenneth Dart is an investor who is known to have participated in a number of high-profile corporate scandals. In 1993 he bought up, with a major discount, bank loans of the government of Brazil for $1.4 bln, after which two years later he attempted to block the restructuring of the entire state debt, demanding more lucrative terms. Furthermore, Dart managed to block the consolidation of Yukos mergers at the end of the 1990s, at which time the company’s owners were forced to buy back his subsidiary stakes. Likewise, Dart fought it out with the owners of Sibneft as a result of which he was assigned a block of shares and a seat on the board of directors in exchange for a stake in Noyabrskneftegaz.
In all likelihood, Dart also became a co-owner of Svyazinvest subsidiaries at the end of the 1990s back at the time when they were still operating as 89 regional telecommunications entities. In 2002 Svyazinvest engineered a mega-merger of these entities into seven RTOs, and this is likely where Dart came into the picture. “Dart’s entities checked every single figure and told us that they support the reorganization an hour before the shareholders meeting” Vladimir Tatarchuk, Vice-President of Alfa-Bank (a former consultant of Svyazinvest) told “Standart” magazine.
And now Svyazinvest faces a similar dilemma. Next week the shareholders meetings of RTOs and Dagsvyazinform get under way at which the issue of the merger with Rostelecom will top the agenda. In order for a positive decision to be adopted in favor of the merger process the holders of at least 75% of the charter capital of each company should vote affirmatively, including the holders of preferred shares. Svyazinvest has 38% stakes in each of them.
According to Mr. Yurchenko, the representatives of Dart Management are interested in the outlook offered by the merged company, after the prospects were outlined by Svyazinvest and these people promised to support the merger process at all of the meetings.
Dart Management has promised to support the reorganization, managing director of the Investor Protection Association (IPA) Denis Kulikov confirmed. IPA also helped to convince then, he pointed out.
Based on the share conversion ratio, for a 7% stake in Far East Telecom (yesterday worth about RUR 710 mln on the MICEX) Dart would receive 0.29% in Rostelecom. The capitalization of the merger company on the date of its incorporation (February 2011) will amount to at least $14 bln, according to estimates made by the investment banks which act as Svyazinvest’s consultants. If this is the case, Dart’s holdings could be worth as much as $40.6 mln (RUR 1.27 mln at today’s exchange rate).
An independent member of the board of directors Mikhail Kobishanov is opposed to Far East Telecom’s merger with Rostelecon on the proposed terms, claiming that a number of other minority shareholders agree with him. He is unaware of Dart Management’s position and all contacts with the company are through the IPA. He himself still believes that the appraisal of Far East Telecom “is neither independent nor fair”. A spokesman for Dart Management yesterday declined to comment on this issue.
If the shareholders of some RTOs fail to garner 75% of the votes for the Rostelecom merger, the merged operator will still gain control (Svyazinvest stakes and the other shareholders that agree to the share swap), Yurchenko says. In time, dissenting shareholders will be able to receive a buyback offer from Rostelecom, but the terms of such an offer might not be very attractive, given that RTOs are to be delisted and their shares would be illiquid.
In recent days, shareholders received another incentive to vote for the merger, as Svyazinvest promised that all RTOs will pay out dividends for the first nine months of 2010, the size of which should exceed dividends for full-year 2009. Dividends on the preferred shares of all RTOs will be 10% more than their stock market value, Yurchenko expects. But they will be paid out only to those willing to swap their shares for those of Rostelecom, as the record date will be on the day following the buyback of RTO shares from dissenting shareholders. For the schedule of meetings and dates of the buyback see www.vedomosti.ru [http://www.vedomosti.ru]).
Not only Dart…
Dart is not the only one who plans to vote for the merger, says Yurchenko, since Gazprombank, which holds a 21.6% stake in CenterTelecom and a 14.45% stake in UTK, has also made the same promise to Svyazinvest. A spokesman for Gazprombank declined to comment on the situation. Another minority shareholder that will definitely throw his weight behind the merger process is Yurchenko himself, who owns 2-7% of the voting shares in each RTO. “In addition, many minority shareholders have entrusted me to represent their interests, and, for example, at the upcoming shareholders meeting of Sibirtelecom (which is scheduled for June 5 – Vedomosti) I will vote with nearly a 15% stake”, he said.
Svyazinvest, holding company. Shareholders: State Property Management Agency (75% - a share), Comstar-UTS (25% + 1 share). Financial indicators (2009, aggregated RAS data): revenue – RUR 258.8 bln, net profit – RUR 28.5 bln.
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