Fridman Seemingly at War With Himself in Tele2 Battle
- Apr. 07 2013 00:00
- Last edited 17:25
Investors may be puzzled why billionaireáMikhail Fridmanáseemed to be bidding against himself for a telecom company that is no longer for sale.
Fridman is linked with two bids for the Russian unit of Nordic operatoráTele2á— one from hisáA1ávehicle and the other, at a higher price, from MTS and VimpelCom , in which he is a leading investor.
Usually a master tactician with a ruthless focus on value, the 48-year-old tycoon is flush with cash and confidence after he and his partners pulled down $14 billion by selling oil firm TNK-BPáto Kremlin-backed oil major Rosneft last month.
"This is standard Fridman — he's being aggressive and he has cash now and feels he can be more aggressive," said oneáMoscow-based investor. "He probably wants to invest it instead of having it sit around earning zero percent in a bank."
For all Fridman's deal-making prowess, the game seems over.
Tele2ásaid on Thursday it had completed its $3.55 billion deal to sell its Russian business to state-backed bankáVTBá. While the price was lower than the Fridman bids, the deal offered cash in hand, rapid clearance by Russian regulators and a cut of any profits ifáVTBásells the unit on quickly.
The deal was closed just eight days after it was announced. VimpelCom, MTS andáA1ádeclined comment regarding the completion.
The approaches fromáA1áand the MTS-VimpelCom alliance ofáRussia's telecoms market leader and No.3 player were made public afteráTele2áhad announced its agreed sale. In the days that followed, they scrambled to show their hands.áA1áoffered up to $4 billion, MTS and VimpelCom up to $4.25 billion.
"There was an attempt to do it througháA1áand later on VimpelCom tried directly... I don't see anything else than just a tactical approach, and then it did not work out," said one telecom executive who declined to be named.
Ukrainian-born Fridman, one of a group of businessmen who amassed vast fortunes and political influence under Russian President Boris Yeltsin in the 1990s, seems left with few options.
VimpelCom and MTS sayáTele2áspurned their approaches, whileáA1ámaintains it put forward its own higher offer before theáVTBádeal was signed, only to be ignored.
Analysts have described theáA1ábid as a means to make the MTS-VimpelCom bid look more appealing toáTele2.
But they also note that Fridman's activism reflects his concern about VimpelCom's competitive position ináRussiaáas the weakest, and most indebted, of the Big Three market players led by MTS and followed by Alisher Usmanov'sáMegaFon.
"I think (A1) has (made its bid) on behalf of VimpelCom to a certain extent, they're doing it to protect VimpelCom," saidáAnna Lepetukhina, telecom analyst at Sberbank.
The dual bids ratcheted up the pressure onáTele2á— ensuring a message was heard that more money is on offer. The telecom companies andáA1, which is part of Fridman's Alfa Group, have said they are pursuing their bids separately.
Remaining tactics could include taking legal action or attempting to buyáTele2áoutright — both thingsáA1áhas said it is considering. It could also try to buy the asset fromáVTB, although if the bank sells it within a year it will have to hand a chunk of the profit toáTele2.
"Alfa andáA1áare extremely clever and extremely aggressive and they will sue anybody at anytime with any argument, whether it's a good one or not," said one Moscow-based lawyer.
Shortly after theáVTBádeal was announced,áA1ásaid it was considering taking legal action, claiming lost opportunity and that it was in talks with minority shareholders. Minority shareholders have not come forward.
A1's threat to litigate was in keeping with Alfa's modus operandi. Fridman has fought pitched legal battles against some of the biggest foreign investors ináRussiaá— among them VimpelCom co-owneráTelenoráand oil giantáBP.
There has been skepticism whether such an approach witháTele2áwould work. "If it's really a question about a UK or U.S. public takeover, and the company is really in play, the board has a duty to go with the highest offer, but I don't think this is that kind of situation," said oneáMoscow-based lawyer who asked not to be named. "I think it's more like a private deal."
Flush with cash from a $28 billion deal alongside three other tycoons to sell out of TNK-BP, and a $5 billion windfall from selling a stake ináMegaFon, Fridman has been encouraged by the Kremlin to pump money back intoáRussia.
However, some observers have said the tycoon, worth $16.5 billion according to Forbes, is looking to spread his risk and pare back his exposure toáRussiaá— where his assets also include stakes in Alfa bank and struggling food retaileráX5.
Fridman has made some large exits ináRussia, selling out ofáMegaFonáand TNK-BP, while making moves to increase his influence overáEgypt's Orascom Telecom andáTurkey's Turkcell.
Alfa Group is setting up an international investment business, the head of the AAR consortium which invested in TNK-BPárecently said. This would look for long-term strategic investment opportunities ináRussia, North andáSouth America,áAsiaáandáAfrica.