TNK-BP May Face Split-up
17.07.2008 (14:47) | RBC
Four Russian billionaires who through their AAR consortium control half of Russian-British oil venture TNK-BP, are considering the possibility of buying the other half from Britain’s BP.Though the latter is not going to sell its stake, analysts say Russian owners could easily find cash for the acquisition. Sources close to the Russian shareholders say TNK-BP could end up splitting into two companies if the conflict between Russian and British owners is not resolved within a reasonable time frame.
Stan Polovets, Chief Executive Officer of AAR (after Mikhail Fridman and German Khan's Alfa Bank, Len Blavatnik's Access Industries and Viktor Vekselberg's Renova Group) told Bloomberg earlier this week that TNK-BP remained largely undervalued compared to its Russian rivals. Five years ago, TNK-BP and LUKoil started out at the same level, about $15 billion or $16 billion. “Now they (LUKoil) are worth $98 billion and we are worth $38 billion,” he complained.
To boost its capitalization, TNK-BP could sell its shares to the public, raising funds for international acquisitions, Polovets believes. He hopes that some compromise could be reached before the next TNK-BP board meeting in September.
Polovets said AAR was unwilling to sell its part of business but would be prepared to buy BP’s stake if the conflict dragged on. The top manager stressed that AAR was under no pressure from the government to perform the deal. However, BP is not going to sell its 50 percent stake in TNK-BP, the British company said in a statement yesterday. The company has stated repeatedly that, being a strategic shareholder, it did not plan to reduce its stake in TNK-BP, reiterated Vladimir Buyanov, BP's spokesman in Moscow.
AAR underlined that it had not made any formal offers to BP to buy its stake in the business. Sources close to the company’s Russian shareholders confirmed this. One source said the deal was unlikely not just because it would be very expensive but also because it would require a complicated scheme. He views Polovets’ statement as yet another attempt to put pressure on BP, adding that AAR might buy BP’s stake with the help of a “powerful administrative resource,” without resorting to big loans.
RBC Daily’s source close to TNK-BP sees another way out. “If they fail to agree on a 50/50 management scheme, they could split up, restoring status quo and getting back the assets each company contributed when the joint venture was started in 2003, also compensating British partners for some expenses. The question is about the amount of that payment,” he said, noting that the two parties’ shareholder agreement expires in 2008.
Denis Borisov, at IFC Solid, estimates a 50 percent stake in TNK-BP at $25 billion. The Russian shareholders could pay the price with their own funds and partly with loans, he reckons. At the same time, Borisov noted that it was not the best time for borrowings right now, with interest rates rising and liquidity levels falling. He, too, believes that selling 10-20 percent of the company’s stock in an IPO would do TNK-BP good.
For his part, Valery Nesterov, of Troika Dialog, values a 50 percent stake in TNK-BP at between $20 billion and $30 billion. For BP, the sale of its stake in TNK-BP is unacceptable as it would slash the company’s oil production by 20 percent. And for AAR, the issue is the price. Nesterov rejected the split-up option as unrealistic, especially given the situation in Slavneft, with co-owners Gazprom Neft and TNK-BP still dividing Slavneft’s assets.
Analysts polled by RBC Daily say AAR might sell a controlling interest to a state company, Gazprom or Rosneft. A source in Gazprom said the gas monopoly had neither received nor made any specific proposals to buy into TNK-BP, and preferred to wait until the shareholder row gets finally resolved.
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