Russia's Rosneft Approves TNK-BP Minority Shareholder Buyback Price

MOSCOW, September 30 (RIA Novosti) – Rosneft said Monday that its board of directors had approved a share buyback from former minority shareholders in TNK-BP, a transaction that is expected to cost the state-owned oil giant about $1.5 billion.

Rosneft said in a statement on its website that it will offer 67 rubles ($2.07) per ordinary share and 55 rubles ($1.70) for preferred shares in RN Holding, the new name for TNK-BP Holding through which minority shareholders held stock in joint oil venture TNK-BP.

About 5 percent of TNK-BP was owned by minority shareholders when it was taken over by Rosneft in a $55 billion deal completed earlier this year that made Rosneft the world’s biggest publicly traded oil company.

Former minority shareholders in TNK-BP, who have watched the value of their equity plummet since the announcement of the deal after Rosneft's reluctance to proceed with a buyback became clear, have been bitterly critical of Rosneft’s standards of corporate governance. Rosneft head Igor Sechin said Friday that the buyback would go ahead after the move was publicly proposed to him by Prime Minister Dmitry Medvedev at an investment conference.

But some analysts said Monday that the buyback share price offered to investors in RN Holding was much lower than the price that Rosneft originally paid to British oil major BP and the consortium of Soviet-born billionaires to buy their stakes in TNK-BP.

“Minority shareholders who accept the offer will receive just half of the price for their shares that the oligarchs and the big foreign major got for theirs. The only shareholders who will benefit from this are speculators who bought the shares on the cheap during the long period of uncertainty – precisely the people whom Sechin said he wanted to punish,” analysts from Sberbank CIB said in a research note Monday. They estimated that the buyback would cost Rosneft up to $1.5 billion.

Shares in RN Holding jumped 5.9 percent to almost 64 rubles in the opening minutes of trading in Moscow on Monday after Rosneft issued its statement about the pricing of the buyout.