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Articles & publications
02.07.2010
Nine years for buybackVedomosti
The Deposit Insurance Agency (DIA) is concerned about the fate of its 29.99% equity stake in Rostelecom, which Svyazinvest is prepared to buy back no sooner than in nine years. And the agency has requested the RF Finance Ministry to intervene in the negotiations.
In recent days, Vnesheconombank and Svyazinvest entered into an agreement concerning a 9.8% stake of common shares in Rostelecom, which it bought out from investment bank KIT Bank in 2009 for RUR 17.12 bln (RUR 230 per share). Under the terms of the agreement, Svyazinvest is required to buy back this stake from VEB in no more than three years at the price of RUR 230 per share, while VEB will in the meantime be a shareholder of Rostelecom, with the right to vote on key issues subject to coordination with Svyazinvest.
DIA purchased its stake in Rostelecom at the same time VEB did. The agency bought a 29.99% stake of common shares in the telecommunications company from KIT Finance on the same terms, spending RUR 50.28 bln, turning this equity position over to VEB for trust management in April 2010. DIA expected the same buyback conditions for this 29.99% stake as VEB received, and managed to reach an agreement that the bank, as trust manager, would work out the transaction with Svyazinvest on behalf of DIA. But so far there has been no agreement, first deputy general director of DIA Valery Miroshnikov said, according to a source close to Svyazinvest. Miroshnikov went on to say that Svyazinvest has agreed to buy back the agency’s stake in Rostelecom no earlier than in nine years, but such a long timeline does not suit DIA. The agency continues to expect VEB to reach an agreement with Svyazinvest to buy back DIA’s stake on the same terms it managed to achieve, Miroshnikov said. In addition, DIA proposed the Finance Ministry convene a joint meeting to discuss the situation with participation of all the interested parties (including VEB and Svyazinvest).
Buying back a 40% stake in Rostelecom is highly cost-intensive, and for this reason Svyazinvest immediately notified the holders of this equity stake that it would be prepared to buy back only 10% in three years, a manager close to Svyazinvest pointed out. Whose 10% this would be, is up to DIA and VEB themselves, he went on to say. The above-mentioned manager is unaware of DIA’s proposal to discuss the situation with the Finance Ministry, but the ministry believes, at any rate, that it would not be possible to compel Svyazinvest to buy back DIA’s stake, the manager is confident.
Svyazinvest’s official spokesman Igor Pshenichnikov said only that the state holding and DIA “are conducting consultations”. Furthermore, an employee of the press service of the Finance Ministry yesterday declined to comment on the situation, and VEB also had nothing to say.
It makes no sense for Svyazinvest to rush into a buyback from DIA, Uralsib analyst Konstantin Belov agrees. Although technically, the agency has enough votes to block decisions adopted at Rostelecom, the agency would not likely resort to such a tactic, Belov believes, since the state corporation would not impede such an important state goal as the restructuring of Svyazinvest. But upon completion of the merger process, DIA’s stake in Rostelecom will be diluted nearly two-fold, he added.
Merger hub
Before the end of February 2011, eight of Svyazinvest’s subsidiaries – seven regional telecommunications operators (RTOs) and Dagsvyazinform – are to be folded into Rostelecom. The shareholders of all RTOs and Rostelecom itself have already approved the reorganization. Based on the terms of the share swap, the total proportion of all holders of voting shares in the current Rostelecom in the new company will amount to approximately 22.5% of its charter capital.
Rostelecom, backbone telecom operator; Shareholders: Svyazinvest (50.67% of voting shares), Deposit Insurance Agency (29.99%), and VEB (9.8%). MICEX capitalization – RUR 101.5 bln. Financial performance (IFRS, 2009): revenue – RUR 65.5 bln, net profit – RUR 3.5 bln.
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