Russian State Oil giant Rosneft will buy
Alfa Group, Access Industries and Renova’s stake in TNK-BP for $28 billion.
TNK-BP was formed through the merger of BP’s Russian oil and gas assets with those of Alfa Group, Access Industries and Renova. Those three Russian companies came together in 2003 and bought 50 percent of TNK-BP. Rosneft said it has secured $30 Bn of Loan Pledges for the deal.
BP announced it would sell off its half of TNK-BP on Nov. 22 to Rosneft for $17.1 billion in cash, plus shares representing a 12.84 percent stake in Rosneft. BP plans to use $4.8 billion of the cash proceeds to purchase an additional 5.66 percent stake in Rosneft from the Russian government. The shares were valued at about $10.86 Bn. BP will end up with owning about 20% of the Russian State oil giant.
The Russian government owns 75% of Rosneft. The company explores and produces oil from western Siberia, southern and central Russia, eastern Siberia and the Far East, and is also involved in projects in Kazakhstan and Algeria.
Skadden Arps Slate Meagher & Flom LLP represented Alfa-Access-Renova on the deal. Cleary Gottlieb Steen & Hamilton LLP advised Rosneft on its acquisitions. Weil, Gotshal & Manges LLP advised a venture between Access Industries and Vekselberg’s Renova Group, while Akin Gump Strauss Hauer & Feld LLP advised Renova.
The acquisition was announced just days after another megadeal, Canadian oil and gas producer Nexen Inc. approved a $15.1 billion purchase offer from Chinese state-owned oil giant CNOOC Ltd.
Source: Bloomberg LP
Video: The Financial Times
TNK-BP Peer group:Ratios based on Thu, 13 Dec 2012.
Enterprise Value
EV('000 USD) 2013 Next 12 month Score
TNK-BP Holding 32 826 849 2.65 2.64
Suncor Energy Inc 56 691 750 4.72 4.71 100%
Husky Energy Inc 31 197 848 5.68 5.68 88%
Marathon Oil Corp. 25 676 929 2.82 2.82 88%
PetroChina Co. 309 199 648 5.14 5.16 85%
Chevron Corp. 201 746 692 3.57 3.57 85%
Santos Ltd 11 158 788 5.80 5.82 80%
TNK-BP Holding Benchmark (Source: Infinancials)
EV/EBITDA next 12 mth
Company TNK-BP Holding 2.64
Peer group TNK-BP Holding excluded 4.38
TNK-BP Holding included 4.25
Sector: Exploration & Production 4.91
S&P 500 7.88
STOXX Europe 600 6.70
Country: RUS 3.34
Great info, below is a link to an older article from the Economist that basically previewed the potential of this move.
http://www.economist.com/news/business/21564914-russia%E2%80%99s-state-…
I entered this as a news entry, however, it behooves the thoughtful practitioner to ask whether this deal makes sense (or not), was it priced fairly, and what are its many pitfalls. After all, when asked last year, the oligarchs were seeking as much as $70 Bn for their stake. Also couple of weeks ago (when they were said to be looking at purchasing BP's stake) they were talking about a public offer.
Analysts take
The overwhelming analysts agreement is the price is fair. RBC Capital Markets LLC's Peter Hutton wrote "we believe that the market will temper any marginal disappointment on exact cash terms with recognition that lower cash converts to a level of ownership in Rosneft which allows recognition of production and reserves, and relief that the deal has been largely completed." Analysts at Tudor, Pickering, Holt & Co. Securities "the BP deal represents a "fair price" and offers "good alignment" with the Russian government".
Afterthoughts
Certainly this deal offers closure over the unresolved political issues that battered the BP-AAR alliance. BP will lose its fat TNK-BP divident ($20 Bn over the years of the alliance) and it will gain two seats on the Rosneft board.
Although I don't know how the integration will fare over time, I'd say that the weaker (Rosneft) but bigger acquired the stronger, smaller rival (TNK-BP) which doesn't spell well for value creation.
Company organizational issues: there seems to be more of a need to restructure and reinvigorate the Acquiror than the target.
The Question of size: Is bigger "badder" ? Rosneft has a serious question of efficiency. After this deal it is to be expected its credit rating will be downgraded.
On the surface, it would seem that this deal offers little complexity. However, the state again takes hold of most natural resources, and it remains to be seen how minority shareholder BP will be treated.
Rosneft - BP Deal; who are the bankers? (Originally Posted: 10/23/2012)
Hey,
does anyone know which banks are advising the two parties on the deal? I know that BP's principal adviser is Morgan Stanley and that UBS and Goldman are also staffed on the deal. Does anyone know which banks are advising Rosneft?
Thanks!
The Kremlin
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