OREANDA-NEWS. Open Joint Stock Company "MegaFon" (LSE: MFON), a leading Russian telecommunications operator ("MegaFon" or "the Company"), announces that it has finalised arrangements with Garsdale Services Investment Ltd ("Garsdale") for the acquisition of Garsdale's interest in Lefbord Investments Limited ("Lefbord"), which holds a 50% interest in Euroset Holding N. V. ("Euroset"), the largest wireless equipment retailer in the Russian Federation. As a result of this transaction, MegaFon now controls a 50% stake in the Russian retail chain.

Pursuant to an agreement made on December 06, 2012 (details of which are available at: -<http://english.corp.megafon.ru/news/201212071111.html>), MegaFon and Garsdale each acquired a 50% interest in Lefbord, which in turn acquired a 50% interest in Euroset. At the same time MegaFon agreed with Garsdale that, on or before 6 December 2013 (subsequently extended to 6 December 2015), it would buy out Garsdale's interest in Lefbord for an amount equal to Garsdale's investment in Lefbord (which encompassed its original investment plus its share of "earn out" payments), plus interest at 8% p. a. The agreement with Garsdale permitted the buy-out price to be extinguished in cash or Company' shares, at MegaFon's option.

On 09 July 2014, pursuant to the foregoing agreement, MegaFon acquired Garsdale's interest in Lefbord, for a price of USD 657.3 million, comprised of Garsdale's original investment in Lefbord in the amount of USD 535 million, a further USD 50 million representing Garsdale's share of "earn out" related payments made by Lefbord, and the accumulated interest accrued thereon.

In accordance with the transaction documentation, the Company exercised its option to extinguish the amount due to Garsdale in ordinary shares of the Company owned by its wholly-owned subsidiary MegaFon Investments (Cyprus) Limited (MICL). For purposes of determining the number of shares to be transferred to Garsdale, as provided in the transaction documentation, the ordinary shares were valued at the weighted average market price for the Company's GDRs for the immediately preceding six-month period. Following the transaction, the percentage interest in the Company held by MICL has been reduced by 3.65%, to 3.92%.

"MegaFon has completed its commitment to Garsdale with respect to the Euroset transaction at this time in order to eliminate a sizeable foreign currency liability from the Company's balance sheet and reduce the average cost of our debt. We used our treasury shares instead of cash as the currency of payment to retain adequate liquidity position in volatile credit market environment", CEO Ivan Tavrin commented.