Russian partner AAR announces plan to sell TNK-BP stake

By bne IntelliNews October 9, 2012

bne -

In another twist to the long-winded saga surrounding the future of Russian oil joint venture TNK-BP, Russian partner Alfa Access Renova announced on October 8 that it has notified BP of its intention to sell its 50% stake, should its bid to buy out the British partner fail.

The move sets up a potential race between the pair to offload their stakes in the JV, which has been troubled by a bitter power struggle between the two for the last five years or so. According to a report by the Financial Times, AAR CEO Stan Polovets said that the Russian partner would seek an exit to a third party, or even via IPO, should BP decide to accept a compteting offer from state giant Rosneft.

"We continue to work on an offer for BP's shareholding in TNK-BP and have no intention of selling out if we are successful, or BP decides to retain its stake," Polovets said. "[However, this notice] gives us optionality in an evolving situation."

"What we are concerned about," he went on to explain, "is that if Rosneft buys BP's stake outright, then we would be in a 50/50 joint venture with solely a Russian state company as the other investor. If Rosneft simply replaces BP, then they won't need us to bring that [local] knowledge and we would simply be financial investors in an illiquid company."

"We can confirm that we have received notification from Alfa Access Renova (AAR) of its intent to sell its share in TNK-BP," BP said in response to the report, according to Reuters. "We can also confirm that we are committed to continue the sales process for our 50% share in TNK-BP as we announced on June 1."

Under the TNK-BP shareholder's agreement, AAR has the right of first refusal on any sale by BP of its stake. The Russian partner originally offered to buy half of BP's stake (i.e. 25% of the company), but that was scuppered by an offer from Rosneft. The state-controlled oil company tried to push through a deal for the TNK-BP stake as part of a wider $16bn tie up with BP last year, but AAR used the shareholders agreement to block the deal.

Late last month AAR announced it would make an offer for BP's full 50% stake. However, to secure its pre-emptive rights, the Russian consortium of billionaires must match Rosneft's proffered deal, which would give BP 12.5% in the state giant, plus some $20bn in cash. According to reports at the end of September, AAR has engaged Rothschild to help it find the cash to power a deal.

However, that search is reportedly based on a plan to leverage TNK-BP's future cash flows - a deal that will look risky to lenders, expensive to the borrowers, and damaging to minority shareholders in the holding company which owns the JV. AAR has until October 17 to table an offer equivalent to Rosneft's.

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