MTS and VimpelCom offer $4.25 billion deal to buy Tele2 Russia, countering VTB

Telecom Lead Europe: Mobile TeleSystems (MTS) and VimpelCom of Russia have expressed their interest to buy Tele2 Russia from Tele2 for around $4.25 billion, including $1.15 billion of net debt.

The offer represents a premium of around 30 percent for Tele2 AB and its shareholders compared to the offer by VTB Capital.

On Wednesday, Tele2 AB announced its decision to sell Tele2 Russia to VTB Group for $2.4 billion in cash. Out of the total consideration of $3.55 billion, $2.4 billion (around SEK 15.6 billion) will be the cash component for equity value and $1.15 billion (around SEK 7.5 billion) in net debt.

“The joint offer to acquire 100 percent of Tele2 Russia for between US$ 4.0 – 4.25 billion, including US$1.15 billion of net debt represents a premium of up to 30 percent for Tele2 AB and its shareholders relative to the equity value of the recently announced offer from VTB Capital,” said MTS and VimpelCom in a letter to Mats Granryd, president and CEO, of Tele2 AB.

Tele2 has around 23 million subscribers in Russia.

In the letter, Andrei Dubovskov, president and CEO of MTS, and Jo Lunder, CEO of VimpelCom, said: “MTS and VimpelCom are leading employers in Russia, and their adoption of leading procurement and technological practices will ensure that Tele2 employees will identify with a culture that is as open and dynamic as any global company.”

Likewise, both companies believe that a combined transaction is feasible and that a joint approach would ensure that the necessary regulatory approvals, consistent with the practices of the Federal Anti-Monopoly Service (FAS), would be obtained for the regional markets concerned.

Tele2 Russia had net sales in 2012 of SEK 12,984 million and an EBITDA result of SEK 4,744 million. The operations have around 3,500 employees.

MTS Group services over 100 million mobile subscribers in Russia and CIS, while VimpelCom has around 214 million mobile subscribers on a combined basis.

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