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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

Friday, Aug. 22


Get ready to pledge allegiance to the flag during National Flag Day, paying tribute to when, 23 years ago today, the iconic hammer-and-sickle was replaced with the tricolor that now flutters in the wind. Petersburgers will be treated to a free concert on Palace Square, a military parade and a culminating air show featuring Russias Russian Knights stunt pilots.



Saturday, Aug. 23


Uppsala Park plays host to Fairy Noon today, a performance of five separate fairy tales ranging from folk classics to more haunting selections. There will be three different renditions of the tales throughout the day and tickets start at 500 rubles ($13.80) for adults and 300 rubles ($8.30) for children.


Classic Finnish cartoon characters the Moomins expect to receive a warm welcome from Russian fans during todays Moomin Festival at the Pearl Plaza Shopping Center at 51 Petergofskoye Shosse. Become a kid again or introduce a new generation to the beloved creation of Finnish writer Tove Jansson.



Sunday, Aug. 24


The tortured genius of Dutch master Vincent van Gogh gets his day in the centers Konnushnaya Ploschad during Make Art Like Van Gogh, a daylong celebration of the artist that will allow amateur artists to try and replicate the work that made the famed painter world-renowned.


Experience a variety of dances highlighting the diversity of the world around as at the final day of the Ethno-Dance International Dance Festival that has been at the St. Petersburg Humanitarian University of Trade Unions this past week. Tonights performance will feature Egyptian dancers accompanied by local orchestras.



Monday, Aug. 25


Today kicks off the Elena Obraztsovoy International Competition for Young Vocalists in the large hall of the Shostakovich Philharmonic. Talented youngsters will showcase their range over the next six days before a winner is chosen on Aug. 30.



Tuesday, Aug. 26


Love movies but hate all those words? Then check out Rodina Cinema Centers Factor of Consensus film forum this evening. Silent movie classics from the beginning of the 20th century will be screened and accompanied by a pianist, who will provide the soundtrack for the ongoing action. The screenings begin at 7 p.m. Check Rodinas website for more details.



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