Rosneft to buy TNK-BP from BP and AAR for $55 billion
On Monday 22nd, 2012, Rosneft makes double win over the TNK-BP internal disputes between its key stakeholders BP and Alfa-Access-Renova (AAR) in closing deal with both parties to take over their respective 50% shares.
On Monday morning BP and Rosneft signed Heads of Terms in the perspective to complete the sell of BP’s shares in TNK-BP to Rosneft for a total amount of $27 billion.
On Monday afternoon AAR and Rosneft inked a separate Heads of Terms in order to transfer the AAR’s shares to Rosneft for a total amount of $28 billion.
This multi-billion deal concludes four years of disputes between BP and AAR at the head of TNK-BP, since BP and Rosneft had precisely the intention to swap $16 billion shares directly leaving AAR out of the deal.
This attempt was stopped last year by the Russia courts at AAR’s request leading BP to considering leaving Russia and and selling all it interests in TNK-BP.
Last June BP confirmed its intention to sell its 50% shares in TNK-BP.
As in chess game, the Russian billionaire consortium AAR holding the other 50% had to adjust their strategy in their conflict with BP and decided finally to proceed in the same way in putting their 50% stake in the market.
According to the Heads of Terms signed between BP and Rosneft BP will receive:
– $17.1 billion in cash
– 12.84% shares of Rosneft representing the remaining $9.9 billion
In parallel, BP is allocating $4.8 billion of the cash received in the operation to increase its stake in Rosneft in buying 5.66% additional shares from the Russian Government.
BP and Rosneft agreed to convert the Heads of Terms into final agreement within a period of 90 days.
Assuming BP and Rosneft agreement to be endorsed by the Russian Authorities, at completion of the transaction BP will:
– Receive $12.3 billion in cash
– Add 18.5% stakes in Rosneft to its actual 1.25% making a total of 19.75% shares of Rosneft.
With this stake in Rosneft, BP expects to go beyond a strategic alliance or a simple partnership in joining Rosneft’s board.
Rosnef to become world-first listed oil producer
From the nine seats available in Rosneft’s board, BP expects to take two of them in order to contribute to Rosneft strategy and financial performances, as well as the management of the production and reserves.
In parallel of the negotiations with BP, Rosneft opened discussions with AAR consortium willing also to sell their shares.
Following the Heads of Terms signed between BP and Rosneft, BP waived its rights in TNK-BP to negotiate with AAR for the purchase of their shares at the benefit of Rosneft.
This waiving allowed Rosneft and AAR to sign a Heads of Terms to acquire the other 50% shares in TNK-BP.
With the acquisition of TNK-BP, Rosneft will become the largest oil producer in the world.
Taking the exceptional financial performances of TNK-BP as a benchmark, Rosneft may consider BP’s contribution as a significant driver for further growth.
BP’s experience in managing operations in Russia, its expertise in deepwater and harsh environment may come right on time to facilitate Rosneft’s expansion.
A year ago BP was ready to leave Russia, opening the door to ExxonMobil, Statoil, Eni and likely other majors to sign strategic alliances with Rosneft in perspective of the Arctic conquest.
With this agreement with Rosneft, BP is coming back by the top end to monitor ExxonMobil, Statoil and Eni or any other major in their most advanced developments.
