Bulgaria’s Vivacom up for sale in spite of ownership dispute

Originally Posted by Financial Times, July 10, 2019

Lazard has been appointed to sell country’s largest telecoms company

Bulgaria’s largest telecoms company Vivacom has been put up for sale in spite of a bitter legal dispute over the ownership of the company.

Lazard has been appointed to sell the business and meetings have been held with potential strategic and private equity buyers, said three sources with direct knowledge of the situation.

Spas Roussev, the Bulgarian businessman that heads the consortium behind Vivacom, confirmed it is for sale. He said it was expected to make earnings before interest, taxation, depreciation and amortisation of €190m this year, making it “the most profitable independent vendor in the Balkans”.

Vivacom could be valued at about €1.2bn based on recent deals in the region, including PPF’s takeover of Telenor’s eastern European telecoms businesses and United Group’s €220m acquisition of Tele2 in Croatia, said a person with direct knowledge of the situation.

The consortium bought the business for €330m less than four years ago. “Now is the right time [to sell],” said Mr Roussev.

Mr Roussev, who lives in London and owns the Levski Sofia football club, is one of Bulgaria’s best-known business leaders. He has 46 per cent of Vivacom. VTB Capital, the UK arm of Russian bank VTB, has almost 20 per cent, as does Delta Capital International, which is the investment vehicle of Bulgaria’s former finance minister Milen Veltchev and his brother George.

Lazard has been warnedthat potential buyers need to be aware of ongoing civil action related to the way Vivacom was sold at auction four years ago and a dispute over its ownership.

A letter — seen by the Financial Times — was sent this week to Lazard by Empreno Ventures, an investment company controlled by Russian businessman Dmitry Kosarev. He bought a stake in the Luxembourg holding company that owned Vivacom prior to the 2015 auction.

Mr Kosarev has since launched litigation against VTB Capital, Mr Roussev and Mr Veltchev. He argues that the auction was a “sham” and Vivacom was sold to the consortium at an artificially low price. The sale, he alleges, wiped out his investment.

Mr Roussev has denied the claim and said the auction — which was triggered by a default on a loan repayment to VTB Capital by a Luxembourg holding company — was “legitimate and transparent”. He said that a High Court ruling in London this month that rejected Empreno’s attempt to challenge the auction on technical grounds was a “substantial win” that has paved the way for a sale.

VTB said Empreno’s accusations were “completely groundless” and the auction to sell Vivacom “was conducted in a fully legitimate, transparent and competitive process”.

Mr Kosarev has said that he will continue to pursue his claim in the UK courts.

Vivacom was privatised in 2004 and changed ownership five times in less than a decade before it fell into the hands of its creditors prior to the sale to Mr Roussev’s consortium.