Rosneft to Buy Back TNK-BP Minority Shares at Market Premium

OAO Rosneft (ROSN) will buy stock at a premium from minority shareholders in the oil producer it acquired in a $55 billion deal this year, reversing its previous stance. RN-Holding shares jumped.

State-controlled Rosneft will comply “voluntarily” with a government order to buy the stock, Chief Executive Officer Igor Sechin said today at an investor conference in Sochi, Russia. The price will be set at an 18-month weighted average, or a premium of 20 percent to 30 percent to the current market price, he said during a panel led by Prime Minister Dmitry Medvedev.

Rosneft bought TNK-BP, a venture between BP Plc (BP/) and a group of billionaires, after their decade-long partnership soured, to become the world’s biggest publicly traded oil producer by volume. Sechin had earlier said Rosneft has no obligation to minority investors, who hold less than 5 percent of RN-Holding, as the venture’s traded unit is now called.

“It is a good step forward,” Mattias Westman, CEO of Prosperity Capital Management Ltd., which oversees about $4.5 billion of Russian assets, said by e-mail. “We will see what exactly the bid will be.”

RN-Holding shares jumped as much as 18 percent and traded up 9.3 percent at 59 rubles at 3:18 p.m. in Moscow, the highest since March 13. That is still 42 percent below its high in March of last year, giving it a market value of about $27 billion. The TNK-BP venture is valued at 1.93 billion rubles ($60 billion), Sechin said.

Rosneft gained 0.8 percent to 265.25 rubles.

Templeton, Allianz

Prosperity and investors, including Templeton Emerging Markets Group and Allianz Investments, the asset-management arm of Europe’s biggest insurer, said Rosneft was putting Russia’s reputation at risk. Rosneft’s decision not to buy out minority stakes, followed by moves to borrow from the company and end the dividend policy, sent TNK-BP Holding’s shares tumbling 26 percent on March 26, the most on record.

Sechin, who bought about $66 million of Rosneft stock last month, thanked Medvedev for announcing the plan and boosting the state-run company’s share price. The board will review the buyout plan today, he said.

Not all investors were cheered by Sechin’s promise.

“Overall this is a good move but now it’s too late,” Oleg Popov, who manages $1 billion of securities for Allianz Investments, said by phone in Moscow. “The group of minorities in TNK-BP has changed a lot over the past year. This won’t be good for the investment climate because they had waited for so long.”

Allianz sold TNK-BP Holding (TNBP) shares last year.

To contact the reporters on this story: Olga Tanas in Moscow at otanas@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net

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