Russian oil giant Rosneft announced landmark deals on Monday to buy 100 percent of TNK-BP from British oil major BP and the AAR consortium of Russian billionaire shareholders.
Under the terms of the deals, BP will receive $17.1 billion in cash for its 50 percent stake plus stock representing 12.84 percent of Rosneft’s shares while the AAR consortium of Soviet-born billionaire shareholders will sell its 50 percent stake in the joint venture “for cash consideration of $28 billion.”
BP also intends to use $4.8 billion of the cash consideration to acquire a further 5.66 percent stake in Rosneft from the Russian government. BP would acquire the Rosneft shares from the Russian Government at a price of $8 per share (representing a premium of 12 per cent to the Rosneft share closing price on the bid date: 18 October 2012), the British oil giant said in a statement.
Therefore, after the proposed transaction is completed, BP will acquire a total 18.5 percent stake in Rosneft and net $12.3 billion in cash.
“This would result in BP holding 19.75 percent of Rosneft stock, when aggregated with BP’s 1.25 percent current holding in Rosneft.”
Russian President Vladimir Putin said Rosneft’s deal with BP was important for the Russian energy sector and the domestic economy as a whole.
“This is a good signal, a major deal, which is important not only for the energy sector but also for the entire economy,” Putin said at a meeting with Rosneft head Igor Sechin.
Rosneft’s deal for an all-out purchase of TNK-BP would make it the world’s largest publicly traded oil company, with higher crude production than global energy titans Exxon Mobil and Royal Dutch Shell.
Rosneft may take out loans from Western banks, sell non-core assets and bond issues to finance the purchase of TNK-BP, Sechin said on Monday.
“There is a possibility of closing the deal completely using funds raised from Western banks. The money on the accounts [of Rosneft] will also be used; the option of selling non-core assets is under discussion and there is a program to float bonds,” Sechin said.
Sechin previously said the deal to buy all of TNK-BP was worth $61 billion.
Rosneft’s credit rating is unlikely to fall despite the sizable loans the company intends to take on, and eventually the company should even be able to improve its financial and economic performance, Sechin said.
Rosneft has passed the documents relating to the purchase of BP’s 50 percent stake in Russia’s third largest oil producer TNK-BP to the Russian government for approval, he said.
“We have sent the deal to the government and federal agencies for approval as per the established procedure,” Sechin said.
Rosneft may consolidate 100 percent of TNK-BP’s shares within six months, he said.
“With intense work, we have the opportunity to close the deal within six months.”
The deal would also allow Rosneft to boost annual oil production to 200 million metric tons (4 million barrels per day), Sechin said, adding the company would not turn into a monopoly on the domestic market as it would account for less than half of all oil produced in the country.
“We don’t have a monopoly position and there is nothing to discuss on this score,” he said.