Bloomberg News

TNK-BP Billionaires Will Offer to Buy Half of BP’s Stake

July 06, 2012

TNK-BP Billionaires Will Offer to Buy Half of BP’s 50% Holding

Employees enter the headquarters of TNK-BP in Moscow. Photographer: Andrey Rudakov/Bloomberg

BP Plc (BP/)’s billionaire partners plan to bid for half of the U.K. oil producer’s 50 percent holding in Russian venture TNK-BP, rather than buying the entire stake valued at $32 billion last year.

AAR, the group representing the billionaires, will notify the U.K. company of an intention to negotiate for the stake on about July 19, Mikhail Loskutov, a spokesman for the group, said today by e-mail. In June, the London-based company said it was considering exiting the venture after receiving proposals to buy its shareholding.

TNK-BP has paid the London-based producer $19 billion in dividends since 2003 and accounts for a quarter of the company’s global output. BP Chief Executive Officer Bob Dudley decided to look for a sale after fighting repeatedly with the Russian partners, who last year blocked an alliance between the British company and Russia’s OAO Rosneft.

“This would just dilute BP’s position and make it a running sore,” said Iain Armstrong, an analyst at Brewin Dolphin Ltd. in London. “BP wants out. If Dudley agrees to this kind of scenario, I suspect his job will be on the line.”

TNK-BP’s traded unit gained 0.3 percent in Moscow to close at 76.25 rubles. BP shares dropped 1.4 percent to 428.2 pence in London trading.

Preliminary Proposal

“While we haven’t yet seen anything, if AAR do express an interest we will consider it alongside the indications of interest that we have already received,” David Nicholas, a London-based spokesman for BP said in an e-mail. “We look forward to receiving their offer and considering it in detail.”

AAR made a preliminary proposal on buying half of BP’s stake about a month before BP said it was considering selling its stake, Loskutov said today. The existing 50-50 partnership no longer serves the shareholders’ interests, billionaire Mikhail Fridman said May 31 after stepping down as TNK-BP chief executive officer earlier that week.

‘It is the price that will send a message,’’ Alexei Kokin, an oil and gas analyst at Uralsib Financial Corp., said by telephone from Moscow today. “If the whole company is valued any less than $40 billion then it is just maneuvering. If it is higher, then it is probably serious offer.

‘‘It would be understandable to do the purchase in two steps because it would be hard to come up with $25 billion in one tranche,’’ he said.

BP and Rosneft offered to buy out AAR last year for $32 billion, possibly including stock and AAR rejected the bid. That offer would value 25 percent of the company at $16 billion. AAR had blocked an alliance between BP Rosneft, saying it violated TNK-BP’s sharehold agreement.

Under the terms of agreement, the billionaires have 45 days to consider the acquisition from BP’s June 1 announcement and 90 days to negotiate thereafter, two people with knowledge of the rights have said. BP can hold talks with other bidders during that period, they said, declining to be identified because the matter is confidential.

To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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