MOSCOW. Dec 7 (Interfax) - Russian mobile phone company Megafon (RTS: MEGF) and its principal shareholder, billionaire Alisher Usmanov's Garsdale, closed a deal to buy 50% of the country's leading mobile phone retailer Euroset (RTS: TDEV) from businessman Alexander Mamut on December 6, Megafon reported on Friday.
The deal values Euroset at $2.14 billion.
The terms of the deal were disclosed by Megafon earlier.
As expected the 50% stake in the retailer was purchased from Mamut's Alpazo Limited by Lefbord Investments Ltd, in which Megafon and Garsdale earlier each purchased 50% stakes. Megafon paid $536 million cash for its stake, while Garsdale's contribution to Lefbord was a 50% stake in Internet Media Partnership Ltd. (owns 50% of SUP Media, in which Mamut already owned a 50% stake), rights to $3 million in SUP debt and promissory notes for $395 million.
Megafon said on Friday that it now owns 50% of Lefbord Investments Ltd, which as mentioned earlier was supposed to buy the 50% stake in Euroset from Mamut on behalf of Megafon and Garsdale.
The deal also provides for paying Mamut an earn out of up to $110 million depending on Euroset achieving a number of targets. Megafon has guaranteed that Lefbord will pay half ($55 million) of its obligations on these payments.
Megafon will have an option to buy out Garsdale's 25% stake in Euroset in the period from December 2013 to December 2015. Megafon will pay $535 million plus 8% interest for this stake, but the operator will also be able to pay with its own shares, at the weighted average price on the LSE in the six months prior to the deal, as reported.
Megafon is reserving 5% of treasury stock, held by Megafon Investments, for this purpose. This stake, based on the price of the IPO Megafon carried out at the end of November, is $620 million ($20 per share).
Megafon's partner in Euroset will be rival mobile operator Vimpelcom (RTS: VIMP), which already owns 49.9% of the retailer. Vimpelcom will buy an additional 0.1%, so that it will have equal ownership of Euroset with Megafon, sources close to the parties in the deal told Interfax earlier.
The Federal Anti-Monopoly Service earlier gave Megafon and Garsdale the green light to buy 50% of Euroset on the condition that all interested operators be allowed to work with the retailer on a non-discriminatory basis.
Megafon and Vimpelcom planned to work out a market strategy for Euroset and the principles of corporate governance at the company.
Megafon said on Friday that on December 6, upon closing the deal, Ararima, Lefbord, Euroset Holding N.V., Garsdale Services, Megafon and Vimpelcom signed an agreement on corporate governance at Euroset Holding N.V. The agreement spells out the conditions for exercising the rights of the shareholders of Lefbord Investments Limited, Megafon said.
Kommersant reported that on Wednesday the shareholders of Euroset held commercial negotiations on "how the market should look in future." One proposal was to lower commissions for connecting subscribers because the operators get too few actually connected subscribers - about 3 million per year - amid heavy sales of SIM cards, totaling about 100 million per year, and are "simply throwing away money, including more than $1 billion on independent retailers," the paper reported, citing an unnamed source.
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