A new company — JSC MF Technologies (MFT) — has been set up to make best use of the partners’ resources and skills. MegaFon will contribute 11,500,100 Class A shares of Mail.Ru Group Limited (LSE: MAIL) (“Mail.Ru”) in MFT, comprising a 5.23% economic share, and providing 58.87% of votes. Lefbord Investment Limited (“Lefbord”), a 100% subsidiary of MegaFon, is the current shareholder of MFT.
Lefbord will sell a 35% stake in MFT to Gazprombank, a 9% stake in MFT to USM and an 11% stake in MFT to Rostec (together, the “Transaction”). Following the Transaction, Lefbord will own the remaining 45% of MFT. The Transaction values 100% of shares in MFT at $450 million, which envisages a 29% premium to the market price of Mail.Ru GDRs as of 4 May 2018. These terms imply a higher premium as compared to the purchase of a 15.2% economic interest in Mail.Ru from USM Holdings in February 2017. MegaFon retains 21,940,148 shares directly, representing an economic stake of 10% in Mail.Ru, and has no plans to sell these shares. Additional information on this share acquisition can be found at: https://corp.megafon.com/investors/news/capital_market_releases/20170209-1853.html.
Morgan Stanley & Co. International plc has provided a financial opinion letter in connection with the Transaction to the Board of Directors of MegaFon.
Jointly with its partners, MegaFon plans to implement a number of digital projects, including creating software products to digitalize the operations of major companies and enterprises, and developing blockchain-based solutions. The most important project on which active work is already being conducted is the creation of a Financial Digital Platform on the basis of which the parties will develop hi-tech services, including payment, credit and other digital products. The partners will also create a fund, Digital JV, to invest in tech start-ups.
The Transaction deal is beneficial for MegaFon and its shareholders both strategically and financially. Digital partnership presents the operator with an excellent opportunity to monetize its investment in Mail.ru; since MegaFon purchased stock in February 2017, Mail.ru shares have risen by more than 70%. Thus, MegaFon will secure $247.5 million in cash from the sale of shares to MF Technologies pre-tax, which will help reduce the Сompany’s debt.
“MegaFon endeavours to play a leading role in Russia’s digital future. Today we can observe the integration of efforts of the leaders in the telecom, high-tech and financial sectors to create new digital products and services as a worldwide trendsetter. Therefore, we are to join forces with the leading Russian players in these markets to build a digital bank and be more actively involved in the corporate segment.. I am confident that by involving strong partners we can be engaged in more projects and ensure access for MegaFon to new growing markets in the digital economy,” said Sergey Soldatenkov, CEO, MegaFon.
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Notes to Editors
MegaFon PJSC is a leading Russian integrated telecommunication service provider, operating in all segments of the telecommunications markets in Russia, and in the Republics of Abkhazia, South Ossetia and Tajikistan. MegaFon is a recognized market leader in the provision of mobile data services, was the first operator in Russia to launch commercial operation of a third generation (3G) network and was the first operator in the world to launch commercial operation of an LTE-Advanced (4G) data network. MegaFon is traded on the Moscow Exchange and the London Stock Exchange under the symbol MFON. Additional information about MegaFon and the products and services provided by MegaFon can be found at: http://www.megafon.ru.
USM Holdings Ltd (USM) is a diversified international company with significant interests across the metals and mining, telecoms, internet and media sectors. USM’s assets include Metalloinvest, a leading global metals and mining company, MegaFon, one of the fastest-growing international telecommunications operators and the largest provider of mobile data services, Mail.Ru Group, the Russian internet and social network leader. USM’s main shareholders are Alisher Usmanov, Vladimir Skoch and Farhad Moshiri.
Rostec Corporation is a Russian corporation that was established in 2007 to facilitate the development, production and export of high-tech industrial products designed for civilian and military applications. The Corporation comprises over 700 organizations that are currently part of eleven holding companies operating in the military-industrial complex and three holding companies working in civilian industry, as well as 80 directly managed organizations. Rostec’s portfolio includes well-known brands such as AVTOVAZ, KAMAZ, Concern Kalashnikov, Russian Helicopters, VSMPO AVISMA, UralVagonZavod, etc. Rostec companies are located in 60 constituent entities of the Russian Federation and supply products to the markets of more than 70 countries.
Gazprombank has successfully operated in the banking market since 1990. Founded by the world’s largest gas producer and exporter Gazprom to provide banking services for gas industry enterprises, Gazprombank has since become a leader in the banking sector, which key performance indicators place the Bank among the top three banks of Russia. Gazprombank as a universal financial institution delivers a wide range of banking and investment services for over 45,000 corporate and about 5 million private clients. Gazprombank invests and lends to companies in major sectors of the economy — oil and petrochemical industry, metallurgy, machine building, electric power industry, real estate construction, transport, telecommunications and trade. Diversified client base enables a strong growth of a corporate loan portfolio and the retail business also shows sustainable growth. Despite of a rapid growth of the loan portfolio, efficient risk policy and prudent approach to borrowers allow the Bank to maintain a ratio of problem and non-performing loans at the lowest level among the largest Russian banks. Steady growth and high reliability were rewarded with ratings assigned by international rating agencies: Moody’s Investors Service, Standard & Poor’s etc.
Mail.Ru Group — international brand My.com (MAIL.IL, listed since November 5, 2010) is the largest internet business in Russia in terms of total daily audience (Mediascope Web Index, Russia, population aged 12-64 in the cities 100,000+, February 2018). Mail.Ru Group is developing an integrated communications and entertainment platform. The Group owns Russia’s leading email service and one of Russia’s largest internet portals, Mail.Ru; three of the major Russian language social networks, VKontakte (VK), Odnoklassniki (OK) and Moi Mir (My World); Russia’s largest online games, including such titles as Warface, Armored Warfare, Skyforge and Perfect World; and instant messaging services ICQ, Agent Mail.Ru and TamTam. The Group operates two largest food delivery businesses in Russia, Delivery Club and ZakaZaka, a location-based marketplace Youla, an auto classifieds service Am.ru, a cross-border marketplace Pandao and a ride-sharing service BeepCar. The Group owns Pixonic, a mobile games developer, and ESforce, one of the largest eSports businesses globally. The Group’s portfolio also includes a leading OpenStreetMap-based offline mobile maps and navigation service MAPS.ME and a controlling stake in GeekBrains, an online education platform for developers. In addition, Mail.Ru Group holds equity stakes in a number of small venture capital investments in various Internet companies in Russia, other CIS countries and Israel. Mail.Ru Group is actively involved in IT education in Russia and has a number of education centers in partnership with major Russian universities. Mail.Ru Group also holds Russia’s most important programming contests.
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The company increased its service revenue, OIBDA and net profit in spite of plummeting roaming and retail revenues.