BP Confirms $17.1 Billion TNK-BP Sale to Rosneft
BP has confirmed today that Rosneft is set to take its 50 per cent stake in TNK-BP following the signing of the heads of terms for a $17.1 billion deal.
An agreement between Rosneft and BP will see Rosneft pay for the 50 per cent stake in the Russian oil and gas giant TNK-BP in two tranches. As part of the agreement, BP will also take a substantial stake in Rosneft. The initial $17.1 billion cash consideration from Rosneft for the 50 per cent stake will be accompanied by a 12.84 per cent stake in Rosneft.
Additionally, BP will seek to use $4.8 billion of the $17.1 billion cash consideration to acquire an an extra 5.66 per cent stake in Rosneft.
In a statement published on its site today, BP said that the deal had been agreed in principle with Rosneft and was contingent on the Russian government agreeing to BP taking the 5.66 per cent stake in Rosneft.
Altogether, should the 5.66 per cent stake be approved, BP's stake in Rosneft will rise from its current stake of 1.25 per cent to 19.75 per cent.
Under the heads of terms, BP and Rosneft will now enter an exclusivity period of 90 days. During this time, the companies will negotiate fully-termed sale and purchase agreements. Once these agreements are reached and then signed, BP says, the usual regulatory and governmental approval must be gained. Once gained, BP expects the deal to be completed in the first half of 2013.
BP will also obligate itself under the signed agreements not to dispose of any of its newly acquired Rosneft shares for at least 360 days following the completion of the transaction.
BP welcomed the signing of the heads of terms today, saying it believed that Rosneft could help to build on the strong foundation BP had created in Russia through TNK-BP.
"TNK-BP has been a good investment and we are now laying a new foundation for our work in Russia.," BP chairman Carl-Henric Svanberg said in the statement.
"Rosneft is set to be a major player in the global oil industry. This material holding in Rosneft will, we believe, give BP solid returns. We consider that this is a deal which will deliver both cash and long term value for BP and its shareholders. It provides us with a sustainable stake in Russia’s energy future and is consistent with our group strategy."
In a separate statement on its own site, Rosneft said that it welcomed BP's stake in Rosneft as well as the opportunity to expand its business in Russia.
"Rosneft’s acquisition of a strategic stake in TNK-BP would be a major step in expanding the core business of Rosneft and would be a value creating investment for our shareholders given the significant production growth and synergy potential," President and Chairman of of Rosneft, Igor Sechin, said today.
"Rosneft would welcome BP as a significant investor in the company, and I strongly believe that we would benefit from BP’s experience and its track-record of implementing best international practices in Russia. I am especially pleased that BP has chosen to remain as one of the largest foreign investors in the Russian economy recognising the potential of both Rosneft and the Russian oil and gas sector."