Boston, MA 05/06/2014 (wallstreetpr) – VimpelCom Ltd (ADR) (NASDAQ:VIP) has confirmed the sale of its 51% stake in Djezzy as part of efforts to resolve an ownership dispute that has been raging for quite some time. The sale was made to the Algerian government giving VimpelCom additional $4 billion in cash and dividends, as part of the transaction. Part of the amount will be used to clear the company’s debt.
Transaction details
Co-Owned by Russian Billionaire Mikhail Fridman, VimpelCom has agreed to sell its 51% stake in Djezzy for $2.64 billion with Djezzy agreeing to pay a total of $1.86 billion in dividends to Global telecom Holding SAE owned by VimpelCom. The transaction could not have come at a better time considering VimpelCom has huge debt levels of $27.5 billion that it has been trying to reduce over the past few years
VimpelCom Ltd (ADR) (NASDAQ:VIP) debt has continued to accumulate partly as a result of acquisitions that have been made in Italy, Algeria and Asia. The disposing of the stake will also benefit VimpelCom considering the Algerian government had forbidden Djezzy from paying dividends to its parent company and consequently made huge tax claims on the unit.
The deal is expected to fully close in the second quarter with the transaction expected to give Djezzy an enterprise value of 5.6 times, earnings before interest.
Operational control
VimpelCom Ltd (ADR) (NASDAQ:VIP) is expected to maintain operational control of Djezzy while also consolidating its assets on its balance sheet. The Algerian government had completely barred Djezzy from importing any new equipment during the dispute something that seems to have slowed expansion. Djezzy is expected to take a fine of $1.3 billion to settle the dispute over tax allegations with VimpelCom and Telecom taking a charge of $2 billion in their 2013 results.
VimpelCom had acquired majority stake in Djezzy in 2010 as part of $6 billion takeover that the company intended to use to diversify its operations outside Russia.
