L1 wins Turkcell arbitration proceedings against Cukurova

3 Aug 2016

LetterOne (L1), the Luxembourg-based international investment vehicle affiliated with Russia’s Alfa Group, has announced that the London Court of International Arbitration has dismissed claims against it by Cukurova and Ziraat Bank relating to the ownership of Turkcell. The decision is expected to pave the way for it to reinstate corporate governance of the Turkish telecoms operator. In its ruling, the tribunal upheld L1’s counterclaim that it was entitled to launch a buyout procedure, triggered by the deadlock of corporate governance of Turkcell, and to waive the requirement for regulatory approval. As such, the tribunal found: ‘There can be no doubt that [L1] has succeeded in this arbitration.’ It also decided that Cukurova and Ziraat should bear the costs of the arbitration together with legal fees in their entirety.

The tribunal’s decision requires that within a period of 60 days, Cukurova must decide whether to buy L1 shares in Turkcell for USD2.7 billion, or sell its shares in Turkcell to L1 for USD2.8 billion. If Cukurova fails to elect to purchase L1’s shares within 60 days, it shall be treated as having opted to sell. Alexey Reznikovich, L1’s managing partner, commented: ‘We are extremely pleased with the tribunal’s award in London and that they have supported our position. 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.’

According to TeleGeography’s GlobalComms Database Turkcell is owned by Turkcell Holding (51.00%), Sonera Holding (part of Sweden’s Telia Company [previously TeliaSonera], 14.02%), and Cukurova Holding (0.05%), with the remaining 34.93% in free float. Turkcell Holding is itself owned by Telia Company (47.09%) and Cukurova Holding (52.91%), while the latter is majority controlled by the Turkish Cukurova Group (51%) and Alfa/L1 (49%).

As such, Turkcell’s overall ownership structure is as follows: Telia Company (38%), Cukurova (14%), Alfa/L1 (13%) and free float (35%). Cukurova’s 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 L1’s) stake in 2014 – a deal that never came to fruition.

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