News
LetterOne claims victory in arbitration court ruling, which should force Cukurova Holding to either sell its shares in Turkcell or buy back those held by the Russian company.
A U.K.-based arbitration court has found in favour of LetterOne with regard to a long-running dispute over the ownership of Turkcell, issuing a ruling that should force a sale of shares in the company by one or other of the warring parties.
Russia’s LetterOne is at loggerheads with Turkish conglomerate Cukurova Holding over the pair’s respective stakes in Turkcell. The dispute has caused problems for the Turkish mobile operator, which was unable to pay dividends for a number of years and, after what turned out to be a temporary thawing in relations 18 months ago, had plans for a 2015 payout and share buyback blocked at a shareholder meeting in March.
On Monday LetterOne announced that the London Court of International Arbitration has made a ruling that will require Cukurova Holding to either buy its shares in Turkcell for US$2.7 billion, or sell its own stake in the company to LetterOne for $2.8 billion.
LetterOne owns 13.2% of Turkcell, a stake that was transferred to it in October 2013 by sister company Alfa Group. Alfa seized the shares, which were being used by Cukurova as collateral on a loan, when the Turkish firm defaulted on a repayment in 2007. Cukurova still owns 13.8% of Turkcell, although its shares are currently held by Turkey’s state-owned Ziraat Bank, which agreed to provide the company with the funding to buy back Alfa’s (now LetterOne’s) stake in 2014, a deal that never came to fruition.
"In its award ruling, the tribunal said, ‘There can be no doubt that [LetterOne] has succeeded in this arbitration,’" LetterOne said in a statement. "It also decided that Cukurova and Ziraat will bear all of the costs of the arbitration together with legal fees."
Under the terms of the arbitration court’s ruling, Cukurova has 60 days to decide whether to buy LetterOne’s stake or sell its own shares. If the company does not categorically decide to buy out LetterOne, it will be adjudged to have chosen to sell, LetterOne explained.
Alexey Reznikovich, managing partner of L1 Technology, one of LetterOne’s three investment groups, said the company is pleased with the result of the case, which should enable the re-election of Turkcell’s board of directors; at present the board lacks representation of any large shareholder, he noted.
"We have for some time been trying to find a resolution to this decade-long deadlock between shareholders so that Turkcell can be managed in a normal way," Reznikovich said. "It is in the interests of Turkcell – and all shareholders big and small – that all parties now follow and honour this award and do not obstruct the resolution process."
It would take a brave industry commentator to predict that this really will be the end of the dispute though. Given that the Turkcell ownership spat has rumbled on for more than a decade, with a number of resolutions agreed and broken in that time, it would come as no surprise if we do not see a concrete deal emerge within the 60-day period specified by the court.
