Russian shareholders of TNK-BP propose 25% buyout to BP.

By bne IntelliNews July 20, 2012
Russian shareholders of Russian-British oil major TNK-BP AAR Alliance made an official proposal for a buyout deal to British Petroleum for a 25% stake in TNK-BP, reports. It was previously reported that AAR's proposal might be mixed, consisting of both cash and shares. Last month Moody's Investors Service downgraded the outlook on Baa2 long-term foreign currency rating of TNK-BP from Stable to Negative. Agency attributed the downgrade to recent announcements by BP on readiness to sell its share in the company. To remind, last month the head of the Russian shareholder of the company AAR Alliance Stan Polovets told Russia Today that the parity ownership scheme exhausted itself and AAR is ready to buy out the stake of BP or to swap it for BP shares. This was followed by BP's proposal to sell its stake. The amount of the deal was unannounced but it was reported at USD 25b-USD 35bn by various sources. According to unofficial reports Russia's largest oil company Rosneft seeks to acquire BP's 50% share in TNK-BP. In the meantime, AAR Alliance (Alfa group, Access Industries and Renova controlled by tycoons Mikhail Friedman, Leonard Blavatnik and Viktor Vekselberg, respectively) is going to use the right of first refusal and the exclusive right to hold negotiations with BP for 135 days. The deal promises to be complicated by many court proceedings and red tape, however: currently Russian court is restarting the case against BP by a private minority shareholder claiming USD 13bn losses to TNK-BP due to failed attempts by BP to form an alliance with Rosneft. Fitch already commented that the case increases political risks of BP. In 2011 the corporate conflict between Russian shareholders and BP peaked when AAR Alliance managed to block the "deal of the year" supported on the government level, a strategic alliance for exploring the Arctic shelf between BP and Rosneft based on a USD 16bn worth share swap. TNK-BP is third largest oil company in Russia, owned on parity conditions by British oil major BP and AAR alliance and accounting for about a fourth of BP's reserves and output. TNK-BP also controls 50% stake in Slavneft, two companies accounting for about 16% of Russia's oil extraction. TNK-BP US GAAP net profit went up by 17% y/y to USD 2.2bn in Q1/12, with revenues increasing by 16% y/y to USD 16.1bn due to higher Urals blend prices and extraction volumes. Company's net debt in Q2/12 went up by 95% to USD 7.5bn, capital investment going up by 22% to USD 1.1bn. Extraction of liquid hydrocarbons increased by 4.2% to 21.2mn tons. Notably, this makes the first IFRS report the company issued, reporting in US GAAP previously. TNK-BP US GAAP net profit went up by 41% y/y to record-high USD 9.21bn in 2011, revenues went up by 33.5% y/y to USD 54.89bn and EBITDA increased by 34% y/y to USD 13.74bn. Improved revenues were previously attributed to higher oil prices, as well as active overseas operations. TNK-BP's net debt as of January 1 2012 increased by 44% y/y to USD 6.74bn. TNK-BP US GAAP net profit declined by 5.7% y/y to USD 5bn in 2009 and increased by 17% y/y in 2010.

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