According to government ministers, Algeria will pick a bank in January to pave the way to take over Orascom’s local wireless service, but will not consult Vimpelcom in the process.
The process of nationalizing Djezzy, which is often considered the crown jewel of Orascom Telecom (ORSTF, quote), should drag on through the first half of next year.
Algeria claims that it has the right of first refusal on any M&A bids on companies based within its borders, and that Djezzy — which generates 40% of all ORSTF revenue — owes it $230 million in back taxes.
Thanks to this news, it now looks more likely that the $6.6 billion deal could collapse. Previously, VIP management held out hope that Algeria might nationalize Djezzy and then resell it to them for up to $2.5 billion over and above the cost of acquiring ORSTF.
However, now that the company is being shut out of the process, there seems to be little point in hoping for a quick resolution to a deal that many traders hated from the beginning.
If this unravels, VIP becomes very attractive again.