MegaFon to Form New Independent Tower Company With Kismet

Cleary Gottlieb represented MegaFon PJSC (MegaFon) in the formation of a leading independent federal player in the Russian tower infrastructure market with Kismet Capital Group (Kismet).

The new company will be created by combining the assets of MegaFon’s First Tower Company valued at ₽94.2 billion ($1.35 billion), consisting of approx. 17,000 towers and supporting structures, with over 5,000 structures of Vertical controlled by Kismet.

The combined company will become a completely independent tower operator, allowing MegaFon to focus on the development of its main telecommunications services business and retain a share in a tower company with high-growth potential. Once the deal closes, MegaFon will lease towers from the combined company.

MegaFon will receive a 25% stake in the combined company and will have two seats on the board of directors. As majority shareholder of the combined company, Kismet will have the remaining five representatives on the board of directors and will be responsible for the operational management of the business. Vertical’s founder Georgy Chumburidze will receive a minority stake in the combined business.

The parties are also contemplating a possibility of the combined company going public and expanding its presence to foreign countries.

The binding agreement was signed on October 26, 2021. The deal is expected to close by the end of 2021, subject to a number of conditions.

MegaFon is a leading Russian integrated telecommunication service provider, operating in all segments of the telecommunications markets in Russia.

Kismet is a private equity investment firm, founded and led by Ivan Tavrin, that is focused on creating a leading SPAC platform in EMEA.