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Articles & publications
09.06.2010
Deferral in Rostelecom buybackVedomosti, Igor Tsukanov
Svyazinvest is preparing to buy back a 9.8% stake in Rostelecom from Vnesheconombank in four years for RUR 230 per share, i.e. the same price at which the bank acquired these shares. Svyazinvest is in no hurry to buy back another 29.99% which is owned by the Deposit Insurance Agency (DIA).
At the beginning of 2010, VEB and DIA completed the buyback of Rostelecom shares from KIT Finance bank, which nearly went bankrupt in the process. VEB acquired 9.8% and DIA purchased 29.99% of the operator’s voting shares for RUR 230 per one share, paying RUR 17.12 bln and RUR 50.28 bln, respectively. VEB likely entered into negotiations with Svyazinvest (controls Rostelecom) on the option to sell its equity position.
Svyazinvest has forwarded to VEB a version of the options agreement, a manager close to the state holding said. This manager said that Svyazinvest itself is ready and willing to acquire a 9.8% stake in Rostelecom from VEB within four years for the same price – RUR 230 per share. In exchange, VEB accepts the commitment to follow Svyazinvest’s recommendations, voting at the shareholders meetings of Rostelecom on key issues such as the election of the Board of Directors. The timeframe discussed for the buyback is from three to nine years, according to a source on the other side of the negotiations.
By law, VEB’s activity should not be loss-making, which means that the shares that were purchased for RUR 230 should be sold without a loss, Vedomosti was told in May by VEB representative Vladimir Dmitriev. Yesterday, the bank’s representatives declined to comment on this situation.
The fact that Svyazinvest forwarded to VEB its version of the options agreement is also known to the first deputy general director of DIA Valery Miroshnikov. Mr. Miroshnikov is convinced that the agreement should concern two equity stakes – the one owned by VEB and the one acquired by DIA, while the terms and conditions of the buyout should be the same. The agency assigned its 29.9% stake in Rostelecom to VEB for management, Miroshnikov points out, and VEB’s task as the trust manager is to conduct negotiations with Svyazinvest and propose an acceptable version to DIA.
Negotiations are underway both with VEB and DIA, according to head of the Information Department of Svyazinvest Igor Pshenichnikov. But there is no way the shares can be bought out in a single block, according to another manager close to Svyazinvest, since DIA’s share is considerably larger than VEB’s, and this means that the term for the options agreement should be longer.
By the end of February 2011, Svyazinvest plans to roll out a single state operator on the basis of Rostelecom by folding eight subsidiaries into the national LD operator. After this, Svyazinvest as the holding company, could be liquidated or merged with Rostelecom, Evgeny Yurchenko noted in a recent interview with Vedomosti. In this case, settlements with VEB and DIA would be assigned to Rostelecom. This is not a big problem, according to VTB Capital analyst Mikhail Galkin. According to his calculations, the debt/EBITDA ratio of the merged Rostelecom could be 2x after its establishment, which would enable the company to have a strong credit rating. That said, the expenses to buy out 40% of the operator’s equity might not necessarily lead to rise in its leverage.
Buying back everything
Aside from buying back all of its shares from VEB and DIA, Rostelecom also faces the task of purchasing from Comstar-UTS a 25% + 1 share stake in Svyazinvest. The parties have already set the price of the transaction at RUR 26 bln. Rostelecom expects to receive this amount from Sberbank.
Rostelecom, backbone operator. Shareholders: Svyazinvest (50.67%), Deposit Insurance Agency (29.99%). Capitalization - $3.27 bln. Headline financial indicators (IFRS, 2009): revenue – RUR 65.5 bln, net profit – RUR 3.5 bln.
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