Articles & publications
17.08.2010
Modest minoritiesVedomosti
Igor Tsukanov
The reorganization of Svyazinvest will require at least RUR 6.8 bln from its subsidiaries (not including Dagsvyazinform) – this is the amount of total expenses required to buy back shares from their minority shareholders which are opposed to the reorganization or failed to vote on this issue.
Yesterday, the Board of Directors of two of Svyazinvest’s seven regional telecom operators (RTOs) – CenterTelecom and Far East Telecom reviewed the reports on the results of shares presented to these companies for buyback by shareholders. The boards of the other RTOs which are to merge with Rostelecom by the end of February 2001, and also the board of Rostelecom itself, have already approved similar reports.
So far, only five RTOs have disclosed the details of their buybacks. These companies will be buying back from 2-8% of their charter capitals, which will cost them a total of RUR 6.17 bn, on average. The largest buyback amount falls to VolgaTelecom, RUR 2.46 bln, which will go to minority shareholders which failed to vote on the reorganization issue or voted against the merger, i.e. those holding 40.37% of the charter capital. Nonetheless, none of these five companies reached the maximum buyback level – 10% of the value of a company’s net assets.
The other two RTOs will spend less than10% of the value of their net assets on the buyback, sources close to their boards of directors claim, and managers in the Svyazinvest Group. The holding was mostly concerned about the situation at Far East Telecom, since a representative of minority shareholders on the board of this company Mikhail Kobishanov claimed that he had reached an agreement with at least 25% of the charter capital of the company to vote against the Rostelecom merger on the proposed terms and conditions. This would have been enough to block the reorganization of Far East Telecom, but in reality a much larger number than the required 75% cast an affirmative vote, i.e. 85.05% of the total number of votes. All in all, Far East Telecom saw about 9.3 mln shares presented for buyback, roughly 7.3% of its charter capital, Vedomosti was told by a source close to operator’s board of directors. This is even less than the number of dissenting votes cast at the shareholders meeting (about 12%). Far East Telecom will spend approximately RUR 850 mln to buy back this number of shares, based on the buyback price approved by the board of directors.
CenterTelecom intends to allocate some 4.5% of the value of its net assets to buy back the shares of its dissenting shareholders or those who refused to vote, i.e. RUR 1.28 bln, sources close to its board claim. Based on the buyback price this means that the company will acquire about 57.4 mln of its shares, or 3% of the charter capital.
The buyback was mainly demanded by holders of preferred shares, notes Troika Dialog analyst Evgeny Golosnoi. The five RTOs which disclosed the details of the buyback will have to acquire five times more prefs than commons. Of the $205 mln that will be spent on the buyback, $181 mln will go to the holders of preferred shares, he estimates. During the last few months before the terms of the reorganization were released, RTO prefs traded at a discount, and their buyback price turned out to be even higher than market price, which means that these securities carry a 15-18% return, he explains.
Admittedly, Svyazinvest offered minorities largesse for their loyalty, since those that opted not to present their shares for buyback will receive generous interim dividends for 9M 2010 – 15% of net profit on common shares and 10% on prefs. The aggregate net profit of RTOs for 9M 2010 will amount to about RUR 30 bln, according to guidance given by Svyazinvest’s general director Evgeny Yurchenko in May.
Right now, the wildcard remains the amount of the upcoming buyback of shareholders from Rostelecom’s shareholders, Golosnoi believes. The national operator’s preferred shares are mainly held by legal entities (retail investors have only 20%), which usually have a more active and rational investment strategy, the analyst explains. But given that at the last shareholders meeting pref holders did not even vote for amendments to the charter, which raise the dividend yield of these securities, he thinks there is a good chance that they are inclined to cash out by presenting them for buyback.
The board of directors’ meeting of Rostelecom, which was to approve the buyback report, was scheduled for August 13 in the form of absentee voting, but its results will be made known only today after the votes have been tallied definitively and the final minutes have been signed, says Oleg Rumyanstev, a representative of the company.
Svyazinvest spokesman Igor Pshenichnikov declined to comment on this issue.
A footprint in Ingushetia
RF President Dmitry Medvedev signed into law a decree on contributing to the charter capital of Svyazinvest 100% of the shares of Ingushelektrosvyaz, which are owned by the Federal Property Management Agency of the Republic of Ingushetia (Vedomosti managed to obtain a copy of the decree). Once an appraisal is made of this asset, Svayzinvest will launch an additional share issue, which will be used to pay for the acquisition. Based on the same scheme, the Telecommunications Ministry has proposed assigning to Svyazinvest the state’s stakes in Chukotkasvyazinform (75%), MMTS-9 (50.67%), Central Telegraph (29%) and Bashinformsvyaz (28.24%).
Svyazinvest, holding company. Controls seven fixed-line regional telecommunications operators, LD operator Rostelecom and 23.3% of MGTS. Shareholders - the Federal Property Management Agency (75% - 1 share), Comstar-UTS (25% + 1 share). Financial indicators (consolidated managerial reports, 2009): revenue – RUR 269.4 bln, net profit – RUR 23.5 bln.
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