Megafon's plans for London IPO threatened by ownership dispute
Friday 19 September 2003
A small Bermudan-based investment company yesterday took on the might of the billionaire Russian oil and banking tycoon, Mikhail Fridman, in a dispute that threatens the float of Russia's third largest mobile phone company on the London and New York stock markets next year.
IPOC International Growth Fund, a $100m (£63m) fund that specialises in investing in IPO opportunities in emerging markets, claims it has the rights to a 25 per cent stake in Megafon and that this has been snatched from it by Mr Fridman's conglomerate, the Alfa Group.
Megafon is the fastest growing mobile business in Russia, with more than 2.5 million subscribers, and estimates have put its value at up to $1bn. IPOC already owns 6.5 per cent in Megafon and it, along with its other shareholders and directors, had planned to list in Russia this year, and internationally in 2004.
IPOC revealed that it had begun legal action to secure its ownership of a further 25 per cent stake in Megafon and stop transfer of the shares to Alfa.
It began talks with the stake's owner, a Russian investment company run by Leonid Rozhestkin called LV Finance, in 2001 and secured an option agreement to take over the Megafon shares. It has paid $49m for the options over the past two years and made the last payment of $16m in July this year. It was informed, however, in August, that LV Finance had since agreed a deal to sell itself, and the Megafon stake, to Alfa. Mr Fridman is considered one of Russia's most influential businessmen and engineered a $7bn deal with BP earlier this year to sell a major stake in his Tyumen Oil Co (TNK) to the British group to create TNK-BP. He began his consortium in the 1990s from a window-washing co-operative and built up a conglomerate of oil, gas, financial and telecoms companies. It owns a stake in rival telecoms company, VimpelCom, Russia's second largest phone operator and is keen to expand its telecoms operations.
IPOC said it was having "difficulties" in getting LV Finance to acknowledge its last payment for the Megafon stock.
"The deal with Alfa is a violation of our agreement with LV Finance," Roland Bopp, general manager of IPOC, said yesterday. "You cannot sell the same assets twice, and all parties should respect our long-standing agreement." LV Finance said last month that it considers the deal with Alfa to be "legally clean and closed".
The other shareholders in Megafon support IPOC, saying LV Finance must honour its agreement to IPOC. They are reluctant to see Megafon fall into Alfa Group's hands, as it is thought that Alfa will want to merge it with VimpelCom, rather than float Megafon. Alfa group failed to return telephone calls.
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