Q&A-Could Sawiris pull off a deal with Vimpelcom?

CAIRO, Aug 18 (BestGrowthStock) – Banking sources say telecoms group
Vimpelcom Ltd (VIP.N: ) is in talks to buy key assets from tycoon
Naguib Sawiris, including a majority stake in Egyptian mobile
firm Orascom Telecom (ORTE.CA: ). [ID:nLDE67B0D5]

Sawiris owns just over half of Orascom Telecom and 100
percent of mobile phone operators Wind Italy and Wind Hellas of
Greece through his investment vehicle Weather Investments. Both
Weather and Orascom are seen as potential targets for Vimpelcom.

Could Sawiris pull off such a deal? Negotiations with South
Africa’s MTN (MTNJ.J: ) collapsed after Algeria’s government
blocked Orascom from selling its Djezzy unit, and similar
problems could overshadow another deal.

Here are some questions and answers about any deal:

WHERE DO THE TALKS STAND?

The banking sources indicated last week that negotiations
between Sawiris and Vimpelcom were informal and exploratory.

On Tuesday, Italian newspaper Il Sole 24 Ore reported that
Sawiris and Vimpelcom were close to signing a non-binding term
sheet for a deal to buy Weather. [ID:nLDE67G09T]

Orascom has said it is not party to any discussions with
Vimpelcom, but this has not quelled market speculation about a
possible deal because talks were likely to be with Weather.

WHAT WOULD A DEAL COST?

Orascom’s current price of 5.25 Egyptian pounds ($0.92) per
share values the company at about $4.8 billion, almost certainly
a discount to any acquisition price.

Russian business daily Kommersant said a deal for Weather’s
shares in Wind Italy and Orascom could be worth $6.5 billion
without debt. One investment bank estimated this to be a 25
percent premium over the market value of those stakes.

Fund manager Elena Suslova at Wermuth Asset Management in
Moscow said $6.5 billion may be too high for most shareholders
as it valued Weather higher than Russian telecoms groups.

There is also debt to consider. Wind Italy had net debt of
about 8.3 billion euros ($10.7 billion) at the end of June and
Orascom had about $4.6 billion, although analysts say Vimpelcom
is probably profitable and underleveraged enough to handle it.

Wind Hellas, Greece’s number-three operator, is
restructuring debt and has invited bids for the company. Greece
might not be part of any Vimpelcom deal.

COULD ALGERIA SINK ANOTHER DEAL?

MTN’s bid for Orascom assets fell apart when Algeria blocked
the sale of Djezzy, the deal’s crown jewel, saying the state had
the right to buy the unit first. Orascom said it would enter
talks to sell Djezzy to Algeria, but talks have not started.

The Vimpelcom deal reported in the press would not involve
selling Djezzy directly, but may still need the blessing of the
authorities who will likely want at least a stake in the unit.

Some brokers and bankers hope a company with a Russian
oligarch as a major shareholder would have better luck reaching
an arrangement with Algeria’s government than MTN did.

“The issue we are really worried about is the situation with
Algeria — it has to be resolved,” said Wermuth’s Suslova.

WOULD A DEAL MAKE SENSE?

Sawiris has suggested he would consider merging his assets
with another company where he can influence strategy without
direct control, analysts say, a shift from the days when keeping
the reins of the company was seen as imperative for Sawiris.

Media have reported Sawiris and his partners in Weather
could get a stake in the merged company as part of a deal with
Vimpelcom, which would be in line with this strategy.

Vimpelcom’s formation ended one of Russia’s longest and most
bitter corporate feuds — between oligarch Mikhail Fridman’s
Alfa-Group and Norway’s Telenor (TEL.OL: ) — and the company has
said it now wants to expand.

Buying all or part of Weather’s assets would be a major push
into Europe, Asia and Africa for the firm, although it could see
Vimpelcom compete directly with Telenor in Pakistan and
Bangladesh. That may lead to a renewal of the shareholder
battle, which would be devastating for investor confidence.

WHAT WOULD THE SHARES DO?

Vimpelcom’s New York-listed shares have already fallen in
recent months, so any negative reaction to the deal might not
take its share price lower.

Orascom shares would almost certainly get a boost, even if
the deal did not trigger a mandatory offer for minority
shareholders.

The stock has fallen by around 30 percent since Algeria
blocked the Djezzy sale to MTN, and brokers and bankers say new
ownership could give shareholders confidence that a solution in
Algeria might be reached more quickly.
($1=0.7774 Euro, 5.69 Egyptian pounds)
(Compiled by Alexander Dziadosz in Cairo and John Bowker in
Moscow; Additional reporting by Stephen Jewkes in Milan; Editing
by Michael Shields)

Q&A-Could Sawiris pull off a deal with Vimpelcom?