A decision by the Board of Directors of OAO Vimpel-Communications to reject the purchase of a Ukrainian mobile operator puts the company back on track to maintain shareholder value and effective strategic development, stated Telenor ASA spokesperson Dag Melgaard.
The VimpelCom Board Friday voted down the acquisition of ZAO Ukrainian Radio Systems, trade-named WellCom, which was first proposed in October last year. The decision was made under the super-majority provisions of VimpelCom’s charter, which require the affirmative vote of eight out of nine board members to approve an acquisition.
“Finally removing this proposal from consideration will clear the way for new ideas that can propel VimpelCom’s growth and development,” Melgaard said. “An acquisition that would have reduced shareholder value has been defeated.”
Telenor’s representatives on the VimpelCom Board have consistently questioned the WellCom acquisition on the basis of a large discrepancy between the proposed purchase price of approximately US$200 million and the value of WellCom, which Telenor estimates to be in a range of zero to US$20 million. A lack of transparency in the sale process has also made Telenor’s representatives on VimpelCom’s Board sceptical about the proposed deal.
“Our representatives on the Board were not satisified with the legal and financial due diligence on WellCom undertaken by VimpelCom’s management and external advisers,” stated Mr. Melgaard.
“Telenor used its own resources to supplement VimpelCom’s evaluation of the acquisition and provided the Board with an extensive financial analysis showing the poor economics of the transaction. We also uncovered two previously undisclosed lawsuits relating to shares in WellCom and a recently commenced Ukrainian criminal investigation involving the company,” Melgaard said.
“Our representatives on VimpelCom’s Board believe the WellCom transaction would have had a negative impact on shareholder value in VimpelCom. The forecasted revenues for WellCom as the fourth operator in the Ukrainian market were clearly exagerrated, while the capital required to develop the company’s network, build market presence and attract customers was far underestimated. The economics were just patently wrong,” Melgaard said.
Two Board representatives of Telenor, which owns 26.6 percent of the voting shares in VimpelCom, voted against the acquisition of WellCom at VimpelCom’s Friday Board meeting in Moscow. An independent director also voted against the purchase, while a fourth director abstained.
The super-majority voting provisions of VimpelCom’s charter, which are intended to protect minority shareholder interests, have been the subject of illegal attacks in Russian courts since last October. In response to a petition by Telenor, the Russian Supreme Court on April 13 stayed the enforcement of a lower court judgment purporting to suspend the charter’s super-majority provisions. The Russian Supreme Court’s decision had the effect of restoring corporate governance in VimpelCom.
“With corporate governance restored, and a misguided deal off the table, VimpelCom can again move forward on effective strategic development,” the Telenor spokesman stated. “We will energetically support the company in its efforts to expand from Russia into other parts of the CIS where sound opportunities are identified.”
Chief Press Spokesman Telenor ASA, Dag Melgaard, Tel (+47) 901 92 000