(Bloomberg) -- Igor Sechin, a long-time ally of Russian President Vladimir Putin, won a battle to buy the government’s share in a regional oil producer, allowing state-controlled Rosneft PJSC to continue expanding.
Russia gave permission for Sechin’s Rosneft to buy the government’s 50.08 percent stake in Bashneft, publishing an order Thursday outlining the terms and saying Rosneft must pay no more than 330 billion rubles ($5.3 billion). The company should sign documents on the deal by Oct. 15, the directive shows.
“We now have ultimate clarity that the government made a choice in favor of Rosneft as buyer of Bashneft,” Alexander Kornilov, an oil analyst at Aton LLC in Moscow, said by e-mail.
Rosneft will get the Bashneft stake without a tender, an official familiar with the sale said, asking not to be identified discussing confidential information. Rosneft’s press service declined to comment. The company’s board approved the deal on Saturday, according to another person with knowledge of the deal.
Originally valued at no more than 315 billion rubles, the Bashneft sale will be the nation’s largest privatization since Rosneft’s $10.7 billion initial public offering in 2006. A fight over potential buyers delayed the sale this year as some members of the government said assets shouldn’t shift from one state pocket to another. Even Putin acknowledged that such acquisitions are probably “not the best option.” Still, he left the door open for Rosneft, saying it wasn’t strictly government-owned because BP Plc owns almost 20 percent of its stock.
Bashneft’s common shares, the class being sold by the state, lost 1.5 percent to 3,163.5 rubles at 5:37 p.m. in Moscow after jumping as much as 1.6 percent during the day. Its preferred shares sank as much as 7.4 percent to 1,658 rubles, an eight-month low. Rosneft traded up 0.4 percent at 343.2 rubles.
At its current price, Bashneft should be able to add about 2 percent to Rosneft’s value, stemming from an estimated $2.6 billion in synergies, Aton’s Kornilov said. Rosneft has sufficient liquidity to avoid taking on more debt, he said.
According to Russian law, a purchase by Rosneft would require the company to make a buyout offer to minority owners of Bashneft’s common shares. Even though such an offer would be higher than the market price, Thursday’s approval “hasn’t generated much enthusiasm from arbitrage investors,” or those betting the deal will close and a buyout will follow, said Otkritie Capital analyst Artem Konchin.
“Arbitrage players are standing on the sidelines for now,” he said by e-mail, citing “uncertainty associated with the nature of the transaction.”
Rosneft itself is the next major state-held asset subject to a planned share offering, with the Economy Ministry committed to divesting a 19.5 percent interest by the end of the year. The value of the stake has been set at 700 billion rubles. The sale is likely to take place in November, RIA Novosti reported Thursday, citing Economy Minister Alexei Ulyukayev.
With assistance from Andrey Biryukov. To contact the reporters on this story: Elena Mazneva in Moscow at email@example.com ;Evgenia Pismennaya in Moscow at firstname.lastname@example.org ;Stephen Bierman in Moscow at email@example.com To contact the editors responsible for this story: James Herron at firstname.lastname@example.org ;Torrey Clark at email@example.com Amanda Jordan
Copyright 2016 Bloomberg News.
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