UPDATE 2-Russian co-owners block TNK-BP dividend
* AAR blocks BP's dividend proposal amid corporate spat
* TNK-BP postponed dividend decision in May
* BP put its TNK-BP stake up for sale in June
By Megan Davies and Andrew Callus
MOSCOW/LONDON, July 30 (Reuters) - BP's oligarch co-owners in TNK-BP blocked a $1 billion dividend from the Russian oil business on Monday, signalling a new low for a troubled relationship which is heading for divorce.
The decision by the AAR consortium, grouping tycoons Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, comes after the British oil firm put its 50 percent stake in TNK-BP up for sale last month.
BP has reaped $19 billion in dividends from Russia's third-largest oil producer since it was created in 2003 from the merger of its Russian operations with those of the oligarchs - - more than double its original investment.
But the relationship between the partners, shaky for years, has deteriorated badly since early 2011.
The block means both BP and AAR are deprived of payment while the future of the venture remains uncertain. However, analysts said it was an expected move, and that neither side would lose out on cash that would stay in the business.
"Investors view this as a technical move and part of the dispute so it will not have an effect on the BP share price for now," said Chris Weafer, chief strategist at Troika Dialog investment bank in Moscow.
"Unpaid dividends form part of the valuation of the company until actually paid. Neither BP nor AAR are losing out as the cash is clearly visible."
If there were to be a long-term cessation of ordinary dividend payments -- paid twice a year - then it would be more damaging to BP, as the TNK dividend is a big part of its own dividend payout, said Weafer.
In a statement, AAR CEO Stan Polovets said the AAR directors voted against the dividend because during "continuing market uncertainty and while corporate governance at TNK-BP remains strained," a cautious stance by shareholders was called for.
TNK-BP said last week its second-quarter net profit fell to $808 million from $2.2 billion a year ago.
BP, which is due to report its own second quarter results on Tuesday, said it would continue to press for payouts from the business.
"It's a matter of good governance," said a spokesman. "It's money that rightfully belongs to our shareholders."
Last year, dividends from TNK-BP accounted for $3.7 billion of its $22.2 billion of cashflow.
BP had a separate setback on Friday when a Siberian court awarded more than $3 billion damages against the oil company in a suit brought by minority shareholders.
BP said in a statement that dividends from TNK-BP are one of many sources of its operating cash flow and do not directly fund BP's own dividends to its shareholders.
"We are confident that the money will remain in the company and that we can ensure it is correctly deployed in the future," the statement said.
AAR made a similar move in February last year, in an intervention that also happened just before BP's quarterly results. Payouts nevertheless continued, and the venture paid out a special $1.25 billion dividend in September the same year.
"BP is in a tighter spot than AAR is," said one analyst at a Western bank who declined to be named, adding that AAR's move was made to pressure BP to resolve the ownership situation. "It is so BP will resolve the situation, otherwise BP can have a shareholder dispute and comfortably receive the dividend."
BP proposed the payment earlier this month and said it would be the first TNK-BP dividend attributable to 2012 income.
TNK-BP postponed its decision on a dividend payout in May because of the lack of a board quorum. Approving quarterly dividends requires a fully quorate board of all 11 members, which TNK-BP does not currently have. Additional, or interim dividends require the unanimous approval of all members.
BP and AAR have had a series of clashes over the years over corporate governance, the culmination of which came last year when BP tried to secure a $16 billion deal with state giant Rosneft, which collapsed after its partners said it violated a shareholder agreement.
The unwinding of the TNK-BP partnership established nearly a decade ago could follow one of several scenarios, and analysts say it could involve either BP or the AAR quartet of billionaires selling their stake.
AAR said this month that it would start talks with BP to increase its stake in TNK-BP but AAR has also said that it would rather resolve the conflict with BP by selling out for cash and a stake in the British oil company.
Russian state oil company Rosneft also last week threw its hat into the ring to buy a stake in the venture, and is seen by some as the most likely acquirer of the asset.
- Tweet this
- Share this
- Digg this