OAO Rosneft, Russia’s biggest oil producer, is closing in on the $55 billion purchase of TNK-BP by signing a binding deal to buy out BP Plc’s billionaire partners.
AAR, representing the partners, will get $28 billion in cash on completing the deal, AAR Chief Executive Officer Stan Polovets said by phone. Closing the transaction is expected in the first half, Rosneft and AAR said today in a joint statement.
The whole TNK-BP purchase, the biggest in Russian history, will vault state-run Rosneft past PetroChina Co. to make it the largest publicly traded oil company, with more than 4 million barrels a day based on third-quarter results. Rosneft reached a final agreement with BP for its half of the venture last month, offering $17 billion in cash and 12.8 percent of its own stock.
“Agreements reached put us in the position to immediately begin preparing the integration,” said Chief Executive Officer Igor Sechin, a former deputy of Russian leader Vladimir Putin.
Rosneft has pledges from banks for $30 billion, according to a presentation, and last month sold $3 billion of bonds, a record for a Russian company. It plans to replace some of the loans with bonds, two people with knowledge of the deal said.
BP said in June it sought to sell its TNK-BP stake, ending a fractious decade-long relationship with AAR, representing the interests of Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik. A shareholder battle over control in 2008 led to the ouster of Bob Dudley, now BP’s CEO, as head of TNK-BP. Last year, a planned alliance between the U.K. explorer and Rosneft collapsed under a legal challenge from AAR, saying the venture had the right to pursue new opportunities for BP in Russia.
“We are very pleased to have signed this agreement with Rosneft,” Fridman, chairman of Alfa Group, said in a statement. He resigned as TNK-BP’s CEO in May, saying the 50:50 partnership no longer met either side’s interests. “I am confident that this deal benefits all stakeholders and is ultimately good for the future of the entire Russian oil and gas industry.”
Cleary Gottlieb Steen & Hamilton LLP advised Rosneft on its acquisitions. Skadden, Arps, Slate, Meagher & Flom LLP advised Alfa Group and Weil, Gotshal & Manges LLP advised a venture between Access Industries and Vekselberg’s Renova Group, while Akin Gump Strauss Hauer & Feld LLP advised Renova.
AAR partners “wish continued success to Rosneft” said Blavatnik, chairman of Access Industries, in a statement. “We are very proud of what we have been able to achieve at TNK-BP.”
TNK-BP, Russia’s third-biggest oil producer, has accounted for about a quarter of BP’s output and a fifth of its reserves, and paid the London-based company $19 billion in dividends since it was formed in 2003. BP agreed to use $4.8 billion of its sale proceeds to buy Rosneft stock from the government and will end up with 19.75 percent in the state-controlled oil producer.
Rosneft has gained 18 percent since the close of trade before the Oct. 22 announcement of its preliminary agreements to buy out BP and AAR in separate transactions. OAO TNK-BP Holding, the venture’s traded unit, has lost 26 percent in that period.
Rosneft has no obligations to minority shareholders in TNK-BP Holding and doesn’t plan to make offers to them, Sechin said last month. It also won’t offer to buy out its own shareholders who may oppose the deals with BP and AAR, he said at the time.
“This deal is irreversible,” Sechin told shareholders Nov. 30 in Khabarovsk city in the Russian Far East.