TNK-BP Energy Group Inc. Enterprise Value: $55.7 bn

Rosneft Market Cap (as of 22/03/13) : $81.60bn

British Petroleum  Market Cap (as of 22/03/13) : $133.37bn

Deal type: Acquisition increase from 50% to 100% all-cash

Rosneft, the Russian state oil giant completed on the 21st of March the acquisition of the remaining 50 percent stake in TNK-BP owned by BP, the British oil company. The transaction makes Rosneft the world’s largest listed oil company by output, with a production of more than 4.5 mln barrels per day (more than 5% of global oil production).

According to the terms of the transaction, BP will receive about $12.5bn in cash and will own 19.75 percent of Rosneft, becoming the largest private shareholder of the Russian producer and securing a seat on the board for Mr. Dudley, the current BP chief executive. These terms are actually different from the terms presented by Rosneft during its presentation of the deal in October 2012, according to which the Company planned to complete the acquisition with $17.1bn in cash and a 12.84% stake in Rosneft, as part of the cash has been used to increase the stake in the Russian company . In order to finance the acquisition the Russian company has signed loan agreements for $14.2bn with a syndicate of international banks, including Bank of America Merrill Lynch, Barclays Bank plc, BNP Paribas SA, The Bank of Tokyo-Mitsubishi UFJ Ltd (BTMU), Citibank, Credit Agricole SA, ING Bank NV, Intesa Sanpaolo SpA, JP Morgan, Mizuho Corporate Bank Ltd, Natixis SA, Nordea Bank AB, Sumitomo Mitsui Banking Corporation (SMBC), Societe Generale, Unicredit Bank AG and Bank of China Ltd.

The acquisition has $10bn of forecasted synergies originating from: joint development areas, crude and product supply optimization, increased scale and enhanced commercial position as well as cost optimization (savings on capital expenditures, substantial scope for management overheads’ reductions, tax benefits from the removal of unnecessary offshore structures).

BP is going to release cash to investors by launching an $8bn share buyback, which amounts to the initial cost of the investment to set up the TNK-BP joint venture with AAR, a consortium of Russian oligarchs. Overall, shareholders of BP will have received $27bn between the buyback and the dividends from the very lucrative yet quite problematic joint venture. AAR has always blocked any initiative that BP could have pursued with other Russian partners and harassed Mr. Dudley out of his Chief Executive Position held at the venture. Above all, now BP is finally free to enter into joint projects with Rosneft as it has removed the oligarchs’ hindrance with respect to working with other Russian companies. Time has not been wasted and the two companies are currently refining the details of a (Russian) Artic offshore exploration, a place where Rosneft retains many licenses and concessions thanks to its governmental-backing (the Kremlin owns more than 75% in the company). It will be interesting to see what will be the next chapter in the always eventful relationship between BP and Russia.

Rosneft’s advisors have been Citigroup and Bank of America Merrill Lynch, while BP has been advised by Rotschild and Weil Gotshal & Manges.


0 Comments

Leave a Reply

Avatar placeholder

Your email address will not be published. Required fields are marked *