Ivars Godmanis, nominated by Latvia's president Valdis Zatlers to form a new government, has said he hopes to settled the issue of Lattelecom privatization, either by going through with the management and staff buy-out proposed by partly-deposed Lattelecom honcho Nils Melngailis, or by selling the company (along with the remaining state holdings in Latvian Mobile Telephone/LMT) to TeliaSonera.
Unfortunately, Godmanis (of the Latvian First Party/Latvian Way merged entity) has to deal with his future coalition partners, where the nationalist Fatherland & Freedom has opposed the MBO, with the positions of the others unclear (even though the same political salad backed the MBO deal in principle during the summer). My prediction -- more muddle well into the next year and Melngailis and Blackstone leaving the scene still very likely.
This presents both an opportunity and a problem for TeliaSonera, the only realistic potential buyer of Lattelecom (regardless of whether it is sold by open auction or as an item hanging inside the coat of a shady street peddlar). If the government abandons the MBO but nationalizes Lattelecom (and lets the Swedes buy LMT), TeliaSonera ends up holding two contradictory means of payment. One is the shares in Lattelecom, whose relative value will plunge(simply on uncertainty) once the MBO crashes , and the other is cash, which will have to be paid for LMT anyway above and beyond the share swap. In other words, the whole thing will cost more cash.
If TeliaSonera buys both companies, then, of course, the total cost will be less because of the diminished value of a leaderless Lattelecom (after the deal, of course, it will be run by a CEO sent by Stockholm to run the company as a division of TeliaSonera responsible for the Latvian market)
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