Telenor and Alfa Reach Deal on VimpelCom

Telenor, the Norwegian telecommunications company, said Monday that it had agreed to a deal that will suspend its yearslong feud with Alfa Group, controlled by the Russian billionaire Mikhail Fridman.

Telenor and Alfa have been embroiled in a long legal struggle to control VimpelCom, the second-largest Russian telecommunications operator, and Kyivstar, the largest cellphone operator in Ukraine. Initially, Telenor and Alfa had invested in the companies as partners; now they will combine them in a new company under a different governance structure.

The agreement to bury the hatchet comes as Moscow is reaching out again to the private sector as capital has become more difficult to attract. A resolution to the feud would remove a stain from Russia’s troublesome record with foreign companies.

Under the new agreement, Telenor and Alfa, through its telecom investment arm Altimo, will merge their assets in VimpelCom and Kyivstar. They will create a new company called VimpelCom Ltd., which will be headquartered in the Netherlands, incorporated in Bermuda, and will be listed in New York after the deal has been closed.

Taken together, the two companies had about 86 million customers in Russia and the former Soviet states as of late June, and their revenue for 2008 would have added up to $12.6 billion.

Present VimpelCom shares will be converted into shares in the new company, and shareholders in Kyivstar are being offered a swap of 3.4 VimpelCom shares for every one of theirs.

“We believe we have established a structure on how decisions are to be taken,” Jon F. Baksaas, president and chief executive of Telenor, said during a Webcast on Monday from Fornebu, Norway. Still, he added, “There are quite a number of elements that need to be put in place before closing.”

Those elements include the settlement or withdrawal of all ongoing legal proceedings between the two companies.

As recently as April, a Siberian court seized Telenor’s stake in VimpelCom as part of a lawsuit brought by Farimex Products, a minority shareholder registered in the British Virgin Islands that owns just 0.0002 percent of VimpelCom.

Before the deal can close, “the Farimex case has to go away,” said Jan E. Thygesen, head of central and eastern European operations for Telenor.

Other parts of the deal include a new board structure, in which three directors will be appointed by Telenor, three by Altimo, and three will be independent, giving neither side veto power on decisions.

Telenor it had received confirmation from Russia’s Federal Financial Markets Service, the regulatory body, that the proposed deal was in accordance with Russian law.

Altimo officials were not available for comment.

The Norwegian company’s legal adviser for the deal is the law firm Orrick, Herrington and Sutcliffe, and its financial adviser is JPMorgan.

Altimo was advised by a legal team from Jones Day led by Vladimir Lechtman in Moscow.

Telenor shares were up 7.30 Norwegian kroner, or 11.5 percent, to 70.80 kroner in midday trading in Oslo.

This article originally ran in the New York Times.