Vallares moves closer to Genel Enerji deal -source

LONDON/ISTANBUL Thu Aug 25, 2011 12:24pm EDT

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LONDON/ISTANBUL Aug 25 (Reuters) - Vallares has moved closer to a multi-billion pound takeover of Turkish oil explorer Genel Enerji, a source close to the situation said, raising the prospect of a big pay day for former BP boss Tony Hayward and financier Nat Rothschild.

The source said Vallares, the London-listed bid vehicle of Hayward and Rothschild, is more favourable towards Iraq-focused Genel Enerji than other assets it has looked at, such as projects in Russia.

A transaction could be announced in the coming weeks, the source said. However the deal has not been finalized and could yet fall apart.

In June, Vallares raised 1.35 billion pounds ($2.2 billion) from investors to target emerging-market oil assets, marking Hayward's return from the business wilderness after he left BP following last year's Gulf of Mexico oil spill. .

The founders said they planned to carry out a transaction -- possibly a reverse acquisition -- within two years of listing but sources close to the group said it ideally would like to agree on a target by the autumn.

In an interview with Reuters in June, Hayward said Vallares was targeting a major company, business or asset with an enterprise value of between 3 billion pounds and 8 billion pounds.

Genel Enerji was valued at between $3.3 billion and $3.6 billion in 2009 during merger talks with Heritage Oil which eventually broke down.

The exact structure of the deal under discussion is unclear, but on completion Hayward, Rothschild and the other founders will receive generous share awards.

Genel Enerji, controlled by the industrials conglomerate Cukurova Group, told Reuters in May that it was in talks with three big global oil companies about the sale of a stake, probably 20 to 25 percent of the firm .

A second source close to the talks said that Genel was now close to a deal and expected to make a statement in the first half of September.

Genel Enerji agreed to merge with London-listed Heritage Oil in 2009, but Heritage pulled out of the deal after Britain's financial regulator fined Genel Enerji boss Mehmet Sepil for insider trading in Heritage's shares.

Vallares and Genel Enerji declined to comment on Thursday. ($1 = 0.610 British Pounds) (Editing by Andrew Callus and Erica Billingham)

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