Credit Suisse and Merrill Lynch advise Sistema on $1.27bn Comstar deal

Investment banks Credit Suisse and Merill Lynch have have advised the conglomerate Sistema on the $1.2bn  sale of a 50.9% stake in fixed-line telecoms provider  Comstar UTS to  mobile operator MTS.

The deal between the two Sistema subsidiaries is scheduled to close at the end of October, while no decision has been made regarding the extension of an offer to Comstar’s  minority shareholders. The deal is worth $1.27bn or $5.98 per ordinary share in cash.

Credit Suisse and Merrill Lynch acted as financial advisers to Sistema. Merrill Lynch also provided a fairness opinion to the board of directors of Sistema.

A full merger between the two units had first been floated about three years ago by Sistema’s principal shareholder Vladimir Evtushenkov.

Mikhail Shamolin, the president and chief executive of MTS, said: “Pairing  the MTS footprint with Comstar’s product mix and know-how will enable us to deliver wider internet access, integrated communications services and innovative solutions to our customers.”

The completion of the deal, which is expected to take place at the end of October 2009, is contingent upon the fulfillment of a number of conditions, including MTS obtaining the required funding.

Victor Klimovich, a telecoms analyst at VTB Capital said the deal would would be positive for all the parties if it gets the green light. In a research note, Klimovich said: “Sistema would get cash to strengthen its liquidity position while MTS would get significant exposure to the Russian broadband market for a reasonable price and be able to compete equally with Vimpelcom (on average in Russia) and (potentially) Svyazinvest.”

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