Russia’s Federal Antimonopoly Service has approved the MTS acquisition of Sistema-Inventure, which will see it take complete control of MGTS, the Moscow region telecom.
The FAS said thatMTS is allowed to acquire 100% ofSistema-Inventure, a Sistema subsidiary, which owns 29.04% of MGTS common shares, or 24.2% of its share capital. Sistema acquired the MGTS stake as part of a swap with Svyazinvest.
Prior to the approval Comstar and Sistema were the main MGTS shareholders, having 70.65% and 23.33% accordinglyof its share capital. MTS in turn has a majority stake of 70.65% in Komstar, which means MTS now controls Moscow telecommunication services provider almost completely, with its share exceeding90%.
Troika Dialog analysts Anna Lepetukhina and Evgeny Golossnoy said the news was expected.
“The FAS approval allows MTS to increase its ownership in MGTS to 93.23% of share capital, which was expected, as the intention was voiced previously by the management of MTS and Sistema.”
Investcafe analyst, Ilya Rachenkov, says that consolidating MGTS with MTS will make for greater investor attractiveness.
“A consolidation of 100% in MGTS is a logical step from MTS, as it enables the Company to fully control its subsidiary and realize some measures that need the approval from 75% + 1 shares, for example, those concerning cessation of a Joint-Stock Company. Also, a full consolidation of MGTS will help MTS get more dividend payments.”
However, Lepetukhina and Golossnoy say the FAS decision will enable a complete buyout to take place with valuation and timing the key factors
“More important is the timing for the transaction’s completion and the price tag for the stake, which has not been disclosed. The deal is expected to be finished by year end. As mentioned earlier by former MTS CEO and current Sistema CEO Mikhail Shamolin, the price will be determined by an independent appraiser, which gives us reason to assume that it will likely be different from the valuation used at the time of the asset swap and offer to minority shareholders, which is 436.2 roubles per common share (10.1 billion roubles for the whole stake, or around $350 million using the current exchange rate).”