UPDATE 2-Vimpelcom mulls pref issue in Sawiris deal-sources

* In talks to buy Italy’s Wind, Egypt’s Orascom Telecom

* May issue 305.6 mln shares

* Issue to minority shareholders and owner of Wind, Orascom

* Move aimed to get minority shareholders’ support

(Adds size of the possible issue, analyst comments)

By Maria Kiselyova

MOSCOW, Sept 13 (BestGrowthStock) – Vimpelcom (VIP.N: ) may issue new
preferred shares to public investors as well as to Naguib
Sawiris’s holding company to gain support for its possible
acquisition of the Egyptian tycoon’s assets, two sources told
Reuters on Monday.

Talk of the possible acquisition of Wind, Italy’s No.3
mobile operator, and 51 percent of Egyptian group Orascom
Telecom (ORTE.CA: ), involving cash and shares, had earlier
sparked a sharp sell-off in Vimpelcom shares. [ID:nLDE66I071]

Investors fear their stakes will be diluted and are also
concerned over a possible increase in debt, credit downgrades
and political risks — particularly in Algeria. [ID:nLDE68215C]
A source close to Vimpelcom’s board said on Monday the
company could issue 152.8 million preferred shares to Sawiris’s
Weather Investments company and the same amount to the public —
increasing its share capital by nearly 23 percent.

“This is a way to increase the attractiveness of the
transaction for the public shareholders and protect them from
the future dilution from the conversion of the Weather preferred
shares (into voting shares) in 2013,” the source said.

He added that Citibank (C.N: ) was acting as an adviser on the
potential share issue.

The move could help the company to avoid a further stock
price fall. The shares are down 10 percent since the talks were
first revealed on Aug 12, and opened up 1.1 percent on Monday in
New York. [ID:nLDE67B0D5]

“This is one of the options under discussion … amid
generally negative investor sentiment,” another source familiar
with Vimpelcom’s plans said.

Vimpelcom and its key shareholders — Russia’s Alfa Group
and Norway’s Telenor (TEL.OL: ) — all declined comment.


“At first glance, this could be an acceptable option for
minority shareholders, but you need more clarity,” Uralsib
analyst Konstantin Chernyshev told Reuters.

One of the sources said the board’s corporate governance
committee had “generally agreed” on the idea of issuing
preferred shares to the public in the same proportion as
preferred shares potentially being issued to Weather.

The proposal has yet to be reviewed by the board meeting.

CI Capital analyst Amr Elalfy said a deal with preferred
shares could make sense for Sawiris, but it wasn’t clear how
Vimpelcom’s shareholders might take to it.

“It depends, of course, on what the terms of the preferred
shares would be,” he said.

Telenor and Altimo, the telecoms arm of Alfa-Group, have
nearly 40 percent stakes in Vimpelcom, and 36.03 percent and
44.65 percent of voting rights, respectively, taking into
account 128.5 million preferred shares held by Altimo.

Minority shareholders have 21.23 percent of economic and
19.32 percent of voting rights in Vimpelcom.

Vimpelcom, recently formed from a merger with Ukraine’s
Kyivstar, has nearly 90 million mobile subscribers, mostly in
Russia and the neighbouring former Soviet republics.

The deal for Wind and Orascom would more than double its
subscriber base and expose it to its first developed market in
Italy — where users typically spend a lot more than in less
developed countries — as well as new emerging markets such as
Algeria, Pakistan and North Korea. [ID:nLDE68215C]
(Additional reporting by Alexander Dziadosz; Editing by John
Bowker and Will Waterman)

UPDATE 2-Vimpelcom mulls pref issue in Sawiris deal-sources