BP’s Russian billionaire partners in TNK-BP have raised their stakes in a bidding war with state giant Rosneft© RIA Novosti. Ilya Pitalev
MOSCOW, September 26 (RIA Novosti)
BP’s Russian billionaire partners in TNK-BP have raised their stakes in a bidding war with state giant Rosneft and want to buy the British oil major’s entire 50 percent stake in the joint venture for cash, Vedomosti business paper reported on Wednesday.
The Alfa Access-Renova (AAR) consortium of four Russian shareholders, which holds a 50 percent stake in TNK-BP, intends to make a new offer to BP to repurchase its entire 50 percent holding, two sources close to AAR told the paper.
The Russian billionaire partners are prepared to pay cash for BP’s entire 50 percent holding and will launch negotiations with banks this week on the terms for raising loans for the deal, one of the sources said. AAR has not yet decided whether the consortium will have to use shareholders’ equity for the transaction.
The Russian billionaire partners had previously indicated their desire to buy only half of BP’s stake in the 50/50 joint oil venture at market value. Russian billionaire Mikhail Fridman, a member of AAR, previously estimated the 25 percent share package to be worth $7-10 billion, in an offer rejected by BP.
Under the TNK-BP shareholder agreement, BP has 90 days for “good faith negotiations with AAR,” during which it may not sell its stake to other bidders. This term expires in mid-October. These discussions, however, do not preclude BP from holding negotiations with other interested parties, and a deal with them is possible if AAR’s offer proves to be worse for the company and its shareholders.
So far, BP has achieved greater progress in talks with state-run oil giant Rosneft, which has offered to buy BP’s entire 50 percent stake in the Russian joint oil venture and is already negotiating raising $10-15 billion in loans from banks to finance a potential cash and shares deal with the British oil major.
BP announced its decision to quit TNK-BP, which accounts for a quarter of the British oil giant's global production and almost a fifth of its reserves, in June 2012 after a long-standing row with the Russian billionaire shareholders that cost BP some of its control over the company.
In January 2011 a proposed joint venture between BP and Rosneft to develop Russian Arctic energy interests, and a proposed share swap between BP and Rosneft, was ultimately abandoned after AAR took BP through arbitration, claiming the TNK-BP shareholder agreement gave TNK-BP the first right of refusal on any proposed BP projects in Russia – a position which was ultimately upheld.
The BP announcement came after TNK-BP CEO Fridman announced his resignation in late May over what he said was a collapse in management, with AAR CEO Stan Polovets saying time had come for a review of the 50-50 ownership structure of TNK-BP.
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Any response would likely boomerang on Russia – the partnership between Rosneft and ExxonMobil is a case in point. The United States has hit Russia with a third round of sanctions. This time the Americans went with a higher caliber weapon, targeting Russia’s biggest energy companies (Rosneft and Novatek) and banks (VEB and Gazprombank).