Rosneft Legally Entitled to Bid for Bashneft, Ministry Says

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  • Offering is about getting highest possible price: Tarasenko
  • Sale may take place this year, draw Russian and foreign bids

Russian oil giant Rosneft PJSC is entitled by law to bid in Bashneft PJSC’s privatization even though it’s state-controlled, according to the Economy Ministry.

“From a legal perspective, Rosneft’s participation in Bashneft’s privatization is possible,” Oksana Tarasenko, head of the ministry’s corporate governance department, said in an interview in Moscow. “For the government, most important is a bidding war for a valuable asset, with the result being to get the maximum possible reward for it.”

Tarasenko’s comments may mean the sale of a 50.08 percent stake in Bashneft is back on track after the government delayed it last month amid a dispute over Rosneft’s participation. Russia is selling assets to raise funds as it faces its widest budget deficit in six years following crude’s collapse. The Bashneft deal, originally valued at as much as 315 billion rubles ($4.9 billion), would be the nation’s largest since Rosneft’s $10.7 billion initial public offering in 2006.

“Bashneft’s privatization may happen by the end of the year, at any moment,” Tarasenko said. “Right now, share prices are at a high level, there’s interest in the deal, so we’re fairly quickly finishing our work on the proposal.”

Bashneft shares rose as much as 2.9 percent in Moscow. They traded up 2 percent at 3,126.5 rubles as of 3:43 p.m. local time, extending their advance this year to 57 percent. Rosneft added as much as 1 percent.

Putin’s View

Members of the government including Economy Minister Alexei Ulyukayev have sought to keep state-controlled companies from participating in privatizations. Even President Vladimir Putin acknowledged this month that the acquisition of a state producer by another company under state control is probably “not the best option.” But he left the door open for Rosneft, saying it wasn’t strictly a state company because BP Plc owns almost 20 percent of its shares.

“In the end, the important thing for the budget is who gives the most money,” Putin said in an interview in Vladivostok.

Other companies may vie with Rosneft for Bashneft shares. Lukoil PJSC, Russia’s second-largest oil producer, is interested, as are Independent Petroleum Co., Russian Direct Investment Fund, Tatneft PJSC, Igor Yusufov’s Energiya fund and Tatneftegaz, Tarasenko said. Three foreign funds have also expressed an interest in bidding, she said.

Rosneft itself is also subject to a planned share offering, with the government proposing to divest a 19.5 percent stake in the oil producer.

The Economy Ministry remains committed to selling shares in Rosneft as early as this year, according to Tarasenko. The value of the stake has been set at 700 billion rubles and preparations are on schedule, she said.