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Rosneft Announces Share Price for Minority Buyout

Published: October 2, 2013 (Issue # 1780)



  • Russian Prime Minister Dmitry Medvedev addresses the International Investment Forum in Sochi.
    Photo: Alexander Astafyev / Pool / AP

On Monday, Sept. 30, Rosneft agreed to buy out the minority shareholders in RN-Holding (formerly TNK-BP) that remained from the Russian state energy companys acquisition of TNK-BP in March this year. According to a Rosneft press release, the shares are valued at about $2 apiece.

Rosneft CEO Igor Sechin had previously been opposed to the idea. According to Bloomberg, Sechins company has over $71 billion in debt, largely as a result of this years TNK-BP acquisition. Recent deals that have seen Rosneft acquire expensive natural gas assets have left Sechin even less inclined to fork over the extra money to these minority shareholders, who represent 5 percent of the former TNK-BP. At $2 a share, full acquisition of these shares would cost Rosneft about $1.5 billion.

Though Rosneft formally set the share price on Sept. 30, the decision to buy was made three days earlier in the form of a verbal commitment between Sechin and Russian Prime Minister Dmitry Medvedev at the International Investment Forum in Sochi.

To an audience of Russias business elite, Medvedev spoke generally about the countrys foreign investment climate and what the state has been doing and what it will be doing to improve it. He stressed the importance of the state taking responsibility for corporate governance and explicitly highlighted three state companies: Gazprom, Russian Railways and Rosneft.

At this point in his speech, Medvedev turned and addressed the Rosneft CEO, who was sitting only two seats away. I know that Rosneft, for example, still has an issue related to its minority shareholders, TNK-BP. Is this right, Mr. Sechin? Sechin affirmed that it was.

Medvedev proposed that to set an example of proper behavior, Sechins company should buy these shareholders out.

Sechin addressed Medvedev but looked primarily at the audience and consented, albeit hesitantly.

Taking into account your concern and solutiondespite the absence of a legal obligation to repurchase part of these shares, we will fulfill your objectives, but on a voluntary basis.

The issue that Medvedev was referring to dates back to Sechins initial refusal to buy out these minority shareholders or grant them 2012 dividends following the March acquisition that made Rosneft the largest oil company by market capitalization in the world. Rosneft is not a charity, Sechin had said earlier this year, in an attempt to explain this refusal.

One disgruntled shareholder, Gennady Osorgin, claimed that Sechins statements and actions had ruined the stocks value and in June filed a complaint against him with the Russian Union of Industrialists and Entrepreneurs, or the RSPP, reported Vedomosti. Official review of the complaint is ongoing.

While Sechins change of heart in Sochi was likely a welcome surprise to minority shareholders, the proposed price of $2, announced by Rosneft on Monday, was a disappointment. The main shareholders of former TNK-BP, by contrast, received almost double that amount per share in the $55 billion acquisition six months ago. Half of TNK-BP had consisted of four tycoons Mikhail Fridmen, German Khan, Viktor Vekselberg, Len Blavatnik who ended up splitting $28 billion.

Rosneft is the worlds largest oil company by output and is expected to have earnings of $13.8 billion in 2013. This will make it the largest contributor to the Russian state budget.





 


ALL ABOUT TOWN

Wednesday, July 30


SPIBA continues their series of Look@It tours, which focus on the success stories of major brands in the St. Petersburg market. Todays event will focus on the Gorky Golf Club and will also be held there. For more details visit spiba.ru



Thursday, July 31


Develop your leadership abilities during a lecture by famous Russian author and coach Radislav Gandapas. The event starts at 9 a.m. at 5 Lodeinopolskaya Ulitsa. The price for entry is 20,500 rubles ($570).


Relax and enjoy a Parisian atmosphere with some romantic and laidback jazz tunes during the Night of French Music at Lenny Jam Cafe, 63 Ligovsky Prospekt. The entrance fee is 250 rubles ($7).


The Womens Business Club is hosting a Beauty Brunch where participants are invited to discuss the latest news in the beauty industry and listen to lectures by professional stylists in the business.



Friday, Aug. 1


Bikers from all around the world will gather to take part in a parade, extreme shows and rock concerts during the International Biker Festival that revs its engines today and runs through Aug. 3 near Olgino Hotel, 4/2 Primorskogo Shosse.


The Peter and Paul Fortress will be turned into an open-air cinema today and tomorrow as part of the 5th International Short and Animation Film Festival. A huge screen across the fortress walls will air short films non-stop with board games, photo sessions and other activities also on offer for visitors. For more information, visit www.opencinemafest.ru



Saturday, Aug. 2


Gatchina Palace Park Museum will host its second annual Night of Light, an impressive audio-visual show across the night sky. Tickets are 600 rubles ($16).


If graphic design is more your thing then check out Illustration Day, where you will be able to visit an exhibition, attend lectures by professionals and even show experts some of your own work. The event starts at noon at Zona Deystvia, 73 Ligovsky Prospekt. The entrance fee is 350 rubles ($10).



Sunday, Aug. 3


History lovers shouldnt miss the chance to see reenactments of World War I battles in Pushkin at noon. Besides exciting war scenes, visitors can enjoy live music, historical costumes, an equestrian show and a fancy-dress parade starting from the Moscow gates.


Garage Sale, the popular and growing flea market where nothing is priced over 500 rubles ($14.11), starts today at noon in Loft-Project Etagi, 74 Ligovsky Prospekt. Be sure to get in early to score a bargain. Entry costs 50 rubles ($1.40)



Monday, Aug. 4


Continue the working week with a calm and steady mind with a free yoga lesson at 7 p.m. in the Bukvoed store at 23A Vladimirsky Prospekt.



Tuesday, Aug. 5


Visit The Romanov Dynasty doll exhibition today, where more than fifty porcelain dolls depicting Russian rulers, and made by Olina Ventzel, will be on show. The exhibition continues through Aug. 31 in Sheremetyev Palace, 34 Fontanka Naberezhnaya.



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