BP, Billionaires Plan to Sell Control of TNK-BP to Rosneft

Billionaires Said to Plan $28 Billion TNK-BP Stake to Rosneft
The logo of OAO Rosneft sits on a plaque outside the company's headquarters in Moscow. Photographer: Alexander Zemlianichenko Jr./Bloomberg

BP Plc and its Russian billionaire partners are in talks to sell control of their TNK-BP venture to OAO Rosneft, a deal that may almost double the size of Russia’s state-run oil company, people with knowledge of the matter said.

The billionaires, represented by the AAR group, are seeking to sell their 50 percent holding to Rosneft for $28 billion, one person said, asking not to be identified before a transaction is done. BP is also negotiating to sell at least some of its stake for a mix of cash and shares in Rosneft, another person said. Officials from AAR, Rosneft and BP declined to comment.

Russian President Vladimir Putin has used Rosneft to tighten the government’s grip on Russia’s energy industry. Rosneft Chief Executive Officer Igor Sechin, a Putin associate for more than 20 years, is set to meet his BP counterpart, Bob Dudley, in London tomorrow to discuss to the deal, two people said. The Moscow-based company would produce about 4.5 million barrels a day of oil and gas if it buys all of TNK-BP, matching Exxon Mobil Corp.

“This strengthens Putin’s national champion,” said Iain Armstrong, an analyst at Brewin Dolphin Ltd. in London. “BP will stay in Russia, but perhaps in a more limited way.”

BP Optimism

BP rose the most since May on optimism an agreement would end the company’s fractious relationship with the billionaires. The London-based explorer offered to sell its own half of Russia’s third-largest oil producer in June after relations broke down with AAR. BP asked for bids by 9 a.m. tomorrow.

BP advanced 3 percent to close at 448.35 pence in London.

A possible agreement between Rosneft and AAR was reported by Sky News earlier.

TNK-BP hasn’t paid dividends on any 2012 income because it has lacked a full board since December. The management recommended a $4.1 billion interim dividend on 2012 profit, according to documents seen by Bloomberg News today. The board may decide on the dividend in the next few weeks.

An agreement of intent has been signed between AAR and Rosneft, Russian Deputy Prime Minister Arkady Dvorkovich told reporters in Moscow. Any deal would need government approval and no requests had been received, he said.

Nine-Year Venture

BP put its half of TNK-BP up for sale in June, proposing to end the nine-year partnership that paid BP $19 billion in dividends and accounts for a quarter of its global production. Both AAR and Rosneft had said they were interested in making an offer for BP’s half.

BP and AAR openly clashed several times during their partnership. In 2008, current BP Chief Executive Officer Bob Dudley was forced to resign as head of the venture and leave Russia after months of battling between the shareholders over strategy. Mikhail Fridman, one of the billionaires, quit as CEO of TNK-BP this year, saying the relationship with BP had run its course.

A year ago, AAR rejected a $32 billion offer for its half from BP and Rosneft. That came after Fridman and BP’s other billionaire partners thwarted a $7.8 billion share swap and exploration agreement with Rosneft in court, saying BP was required to pursue all opportunities in Russia exclusively through TNK-BP.

Under the terms of TNK-BP’s shareholder agreement, BP has 45 days to decide on bidding for AAR’s stake before the billionaires can close a deal with another buyer.

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