UPDATE 2-TNK-BP oligarchs try to dodge Rosneft

Tue Oct 9, 2012 11:05am EDT

* Sale or IPO preferable to BP sellout-AAR

* Oligarchs fear Rosneft win could devalue business

* BP going ahead with its own sale plan

By Andrew Callus and Douglas Busvine

LONDON/MOSCOW, Oct 9 (Reuters) - The billionaires who co-own Russian oil venture TNK-BP and want to buy out partner BP have told the British company they would rather sell their half of the $50 billion business than end up in a devalued partnership with state-backed rival bidder Rosneft.

Notifying BP of their intention to sell, the Soviet-born tycoons represented by the AAR consortium have also proposed an initial public share offer (IPO) for Russia's third-largest oil producing company, claiming that a shareholder agreement obliges BP to consider such a plan.

"We can confirm that we have received notification from Alfa Access Renova (AAR) of its intent to sell its share in TNK-BP," BP said on Tuesday, adding that it would continue with trying to sell its own stake in the TNK-BP holding company, which has been beset by a long series of disputes between BP and AAR.

But the latest move by the four oligarchs to open up their own exit routes adds a new dimension to the sale process, which analysts reckon should net BP around $25 billion, and strengthens the hand of Rosneft as a single buyer faced with two sellers.

AAR and Rosneft are the only known prospective bidders for BP's stake, and AAR's right as co-owner to keep exclusive talks open on buying the stake expires on Oct. 17.

But sources familiar with the discussions have said it is unlikely AAR will go head-to-head with Rosneft in bidding for BP's stake because Rosneft has more financial firepower and better potential for gaining the all-important Kremlin backing.

"We continue to work on an offer for BP's shareholding in TNK-BP and have no intention of selling out if we are successful or BP decides to retain its stake," said Stan Polovets, chief executive of AAR, which holds 50 percent of the TNK-BP holding company on behalf of the oligarchs, Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik.

"However, this notice gives us additional flexibility including pursuing an IPO or a disposal option which may be a way to optimise returns for shareholders," he said in quotes emailed by a spokesman.

AAR's fears, echoed by industry sources and analysts, are that if BP sells to Rosneft TNK-BP's assets will have a lower value, losing the technical expertise and international standing that BP brings, and becoming more vulnerable to state interference.

BP put its half of the business up for sale in June, and has been in talks with both AAR and Rosneft.

TNK-BP is very profitable and provides a quarter of BP's oil production, but the oligarchs and BP's chief executive Bob Dudley, who once had to flee Russia to avoid arrest as TNK-BP's chief executive, have long disagreed on strategy.

In the latest falling out AAR blocked an attempt by BP to tie up with Rosneft for an Arctic exploration venture last year, by arguing in the courts that BP was obliged to conduct all its business in the country through TNK-BP.

BP'S CHOICE

With AAR putting its own stake up for sale, it is now possible that BP could turn buyer rather than seller. A BP spokesman confirmed receipt of AAR's proposal to sell on Tuesday but declined to comment when asked whether it would make an offer for AAR's stake.

If it does bid BP has the right to a 45-day exclusivity period in which AAR cannot consider bids from any other potential buyers. That would be followed by a 90-day period in which it can talk to other buyers, but must maintain good-faith negotiations with BP. It would be a carbon copy of that procedure that comes to an end for BP's sale process on Oct. 17.

BP has been busy selling assets around the world to help cover the multi-billion dollar, and as yet unsettled, liabilities it faces for the 2010 U.S. Gulf oil spill. On Tuesday it secured the latest of these divestments when Marathon bought its Texas City refinery in the United States .

But Dudley has made it clear he wants to plough some of the proceeds of a TNK-BP sale back into Russia, and last month BP said it wanted to buy a stake in Rosneft should a deal go through. This gave credence to talk among investment bankers that Rosneft's offer for TNK-BP may come partly in the form of Rosneft stock.

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