The pair will invest a total of $237.1m on a parity basis, which will be used to “further develop and strengthen” the company’s market position.
In July it was reported that RDIF planned to join Deutsche Bank to purchase a stake in Rostelecom for $250m, and in September an agreement was reported to be in place for the deal.
As a result of the deal, the two investors will purchase 72,187,366 Rostelecom ordinary shares from its subsidiary company MOBITEL. The structure of the deal also contains agreements relating to call and put options, RDIF said, with Rostelecom entitled a portion of the profits from an increase in value of shares.
MISEX-listed Rostelecom is the market-leader in Russia for FBA and pay television, with over 9.5 million broadband services subscribers and more than 6.8 million users of Rostelecom pay TV. The company is also one of Russia’s largest mobile with more than 13.6 million mobile subscribers.
Kirill Dmitriev, CEO of the Russian Direct Investment Fund, said, “Sustained growth in the Russian economy means demand among consumers and businesses for reliable and ultra-fast broadband will continue to increase. It is therefore the right time to invest in the telecommunications sector. This deal capitalizes on the recent changes in Rostelecom’s corporate governance and development strategies and will be another important step in realising Russia’s infrastructure potential”.
Sergey Kalugin, President of Rostelecom, added, “We are confident in the potential of our company, so it was important for us to retain the right to benefit from upside deriving from an increase in the share price. On the other hand, we are committed to improving Rostelecom’s investor base and attracting high-profile investors. We have therefore decided to offer treasury shares to help achieve this outcome.
“Attracting long-term partners is a key part of Rostelecom’s strategy to successfully achieve its ambitious goals and, I hope, will serve to attract other qualified investors.”
The Russian Direct Investment Fund (RDIF) was founded in June 2011 to make equity investments, primarily within Russia. RDIF’s management company is a 100 per cent subsidiary of Vnesheconombank. Earlier in 2013 RDIF director Sean Glodek told AltAssets RDIF was preparing for its busiest year on record in an attempt to put Russia on the private equity map.
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