Rosneft announces that it has entered into an agreement in principle with BP to acquire its 50% interest in TNK-BP in exchange for $17.1 billion in cash and 12.84% Rosneft shares currently held in treasury.

 

In connection with the proposed transaction, BP has offered to purchase from Rosneft’s parent, Rosneftegaz, at a price of $8.00 per share, an additional 600 million Rosneft shares, representing a 5.66% stake in Rosneft. Rosneftegaz has until 3 December 2012 to accept this offer.

 

Rosneft and BP have agreed a 90-day exclusivity period for negotiations to enter into a definitive sale and purchase agreement with respect to TNK-BP. The execution of the final documentation is conditional on the Russian government approving the sale by Rosneftegaz of 600 million ordinary Rosneft shares and final board approvals of the TNK-BP transaction by Rosneft and BP. In addition, completion of both transactions would be subject to customary conditions, including regulatory and other approvals, and is expected to occur at the same time, in the first half of 2013.

 

On completion of the above transactions, BP would hold a 19.75% stake in Rosneft, inclusive of its existing 1.25% interest. Under Russian law, this shareholding would entitle BP to two seats on Rosneft’s 9-person board of directors.

 

The acquisition of 50% of TNK-BP represents a unique and compelling strategic opportunity for Rosneft to create significant value for Rosneft shareholders.

 

Igor Sechin, President and Chairman of the Management Board of Rosneft, said: "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.

 

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."

 

Rosneft will finance the cash consideration of the transaction from a combination of existing cash resources and new borrowings.

 

In addition, Rosneft has agreed heads of terms with the AAR consortium (Alfa Group, Access Industries and Renova) (“AAR”) to acquire AAR’s 50% interest in TNK-BP for cash consideration of $28.0 billion, subject to the negotiation of definitive agreements, corporate and regulatory approvals and certain other conditions.

 

The transaction with AAR is entirely independent of the transaction with BP.