Articles & publications
06.07.2010
Svyazinvest signs off on options agreement, subject to approval by VEB steering committeeKommersant
Inna Erokhina
VEB could request Svyazinvest to buy back its 9.8% stake in Rostelecom to Svyazinvest from June 25 2013 until June 24, 2014 for RUR 230 per share with a 7.7% interest rate from the date on which a shareholders agreement is stipulated between the two companies. Svyazinvest has no plans to buy back a 29.9% stake in Rostelecom held by Deposit Insurance Agency (DIA).
Kommersant managed to find out about the terms of the shareholders agreement between Svyazinvest (controls 50.67% of the voting shares in Rostelecom) and VEB. The agreement is dated June 25, but so far it has been signed only by one party – the general director of Svyazinvest Evgeny Yurchenko. The agreement lays down the terms for the parties to vote on key issues at general shareholders meetings of Rostelecom. One of the mandatory conditions provides that irrespective of the term when the agreement is signed by VEB, the document should enter into force only after it is approved by the bank’s steering committee. According to Kommersant’s source, the bank’s steering committee is scheduled to meet at the end of July.
The parties also agreed to sign two share buyback options. Under the terms of the put option, effective June 24, 2013 until June 24, 2014 VEB is entitled to demand Svyazinvest to buy back its equity stake in Rostelecom at the price of RUR 230 per share with a 7.7% interest rate from the date on which the agreement is concluded. In addition, VEB is entitled to sell its equity position in several tranches. In a number of cases, VEB can demand that this stake be repurchased prematurely, for example in the case of bankruptcy, liquidation or reorganization of Svyazinvest. Furthermore, VEB is entitled to sell its stake to a third party, whereas Svyazinvest is vested with the right of preemptive buyback.
After the validity term of VEB’s put option expires, Svyazinvest will have a call option (with terms similar to the put option) whereby the state holding itself can buy back VEB’s entire stake of part of these shares. The expiration date of this option is June 24, 2015.
The agreement also contains a provision for the parties (including DIA, whose shares will come under VEB’s management as of January) to vote in tandem on a number of issues at general shareholders meetings and board of directors meetings. The main issues include all items on the agenda except for the budget, liquidation and reorganization, appointing nominees for the board of directors, etc.
Stakes in Rostelecom went to VEB and DIA as part of the financial rehabilitation of KIT Finance. VEB paid RUR 17.12 bln for its stake, while DIA shelled out RUR 50.28 bln at RUR 230 per share. Ernst & Young appraised the value of one common share in the operator at RUR 143.55 in line with the restructuring of Svyazinvest pursuant to the conversion of the shares of regional telecommunications operators into the shares of Rostelecom. Yesterday, Rostelecom’s shares were going for RUR 108 on MICEX, which means that DIA’S stake would be worth RUR 23.6 bln, while VEB’s would be valued at RUR 7.9 bln.
Uralsib analyst Konstantin Chernyshev believes that the scenario of a premature buyback is unlikely on the part of VEB. Both organizations are state structures, which means that the decision would be adopted at the political level. For this reason, it is highly unlikely that someone would divert cash away from Rostelecom during the time of its restructuring process for other purposes, since Svyazinvest has nowhere to draw cash except from dividend payments”.
Before DIA assigned its stake for management to VEB, Svyazinvest intended to enter into an options agreement with the agency. Under the terms of the agreement, DIA would be given the right to demand the buyback of its shares for RUR 230 with a 7.7% interest rate, but only in nine years. Now Kommersant’s sources close to Svyazinvest claim that the company “basically has no plans to purchase DIA’s stake”. First deputy general director of DIA Valery Miroshnikov told Kommersant that the agency expects with the help of the Finance Ministry to obtain the same terms and conditions as those awarded to VEB.
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