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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, Oct. 22


English teachers can expect to receive a few useful pointers today from Evgeny Kalashnikov, the British Council regional teacher, during the EFL Seminar this afternoon hosted by the British Book Center. The topic of todays seminar is Grammar Practice.


Young Petersburgers will get the chance to jumpstart their careers at Professional Growth, a job fair and forum featuring more than 40 major Russian and international companies vying for potential candidates for future positions. The forum not only is a chance to network but also to learn more about the modern business world and to understand what it takes to get the job you want.



Thursday, Oct. 23


AmChams Public Relations Committee meeting is scheduled to meet this morning at 9 a.m. in their office in the New St. Isaac Office Center.


Sportsmen get their chance to stock up on all kinds of gear at the Hunting and Fishing 2014 exhibition starting today at Lenexpo. Everything from rods and reels to boats, motorcycles and equipment for underwater hunting will be on sale so that any avid outdoorsman can always be prepared.



Friday, Oct. 24


SPIBAs ongoing Breakfast with the Director series continues today, featuring Tomas Hajek, Managing Director of the Northwest Division at Danone Russia. Hajek will be discussing collaborations between businesses from different cultures. The meeting is at 9 a.m. at the Domina Prestige St. Petersburg hotel and all who wish to attend must confirm their participation by Oct. 23.


Get your gong on at Sounds of the Universe, a concert at the city planetarium this evening incorporating six different gongs to create relaxing songs that will transport you upwards into the stratosphere. Tickets are 700 rubles ($17).



Saturday, Oct. 25


AVA Expo, the eighth edition of the event revolving around all things pop culture, returns to Lenexpo this weekend. Geeks, nerds, dweebs and dorks will have their chance to talk science fiction and explore a variety of international pop culture. Tickets for the event can be purchased on their website at avaexpo.ru.



Sunday, Oct. 26


Zenit St. Petersburg returns home for the first time in nearly a month as they host Mordovia Saransk in a Russian Premier League game. Currently at the top of the league thanks to their undefeated start to the season, the northern club hopes to extend the gap between them and second-place CSKA Moscow and win the title for the first time in three years. Tickets are available at the stadium box office or on the clubs website.



Monday, Oct. 27


Today marks the end of the art exhibit Neophobia at the Erarta Museum. Artists Alexey Semichov and Andrei Kuzmin took a neo-modernist approach to represent the array of fears that are ever-present throughout our lives. Tickets are 200 rubles ($4.90).



Tuesday, Oct. 28


The Domina Prestige St. Petersburg hotel plays host to SPIBAs Marketing and Communications Committees round table discussion on Government Relations Practices in Russia this morning. The discussion starts at 9:30 a.m. and participation must be confirmed by Oct. 24.



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