UPDATE 1-Tycoons end board dispute with BP

Thu Nov 8, 2012 1:16pm EST

* Agreement to ease $55 bln sale to Rosneft

* Dividend payments unlikely - sources

* Uncertainty over minority damages appeal hearing

By Douglas Busvine and Melissa Akin

MOSCOW, Nov 8 (Reuters) - The Soviet-born billionaires who share ownership of Anglo-Russian oil firm TNK-BP with partner BP declared an end to a boardroom stalemate on Thursday, a step that could smooth the way to selling the business.

AAR said the 50-50 owners had agreed that although the board was still short of a third independent director, following a resignation, it should be allowed to agree such matters that require a simple majority as well as those that need unanimity.

Protacted boardroom discord has up to now blocked billions of dollars of dividend payments by TNK-BP and sources familiar with the matter said the easing of friction between the co-owners of Russia's No.3 oil firm would allow the partners to focus on finalising the $55 billion sale of TNK-BP to Russian state oil major Rosneft.

Any payout now would reduce the price payable by Rosneft by an equivalent amount, but it would give both parties cash in hand. Neither side would comment on whether they would propose a dividend under the newly co-operative board atmosphere.

With the hatchet buried, the TNK-BP board numbers 10, with 4 apppointees from each side and 2 independents, one appointed by each. A disagreement could therefore still end in stalemate, but it does become statistically less likely.

"This agreement will enable the parties to better focus on preparing their respective transactions with Rosneft, while having a fully-functioning board of directors will ensure effective corporate governance and business continuity," AAR CEO Stan Polovets said in a statement.

BP said: "We welcome the restoration of governance as we work to formalise the transaction with Rosneft."

In a deal that would end a hugely profitable but fraught partnership, BP agreed last month to sell its one-half stake in TNK-BP to Rosneft in a cash-and-stock deal worth an estimated $27 billion.

Counting the $19 billion in dividends since buying half of TNK-BP for $8 billion in 2003, BP stands to make six times its original investment.

BP would net more than $12 billion in cash and end up owning 20 percent in Rosneft, headed by Igor Sechin, a close ally of Russian President Vladimir Putin.

Sources say that valuations for the deal are based on a so-called "lock box" basis, meaning that cash paid out of TNK-BP after the beginning of this year would be subtracted from the sale price.

CASHING OUT

AAR has also signed an outline deal to sell its stake in TNK-BP for $28 billion in cash. Sources close to TNK-BP said the tycoons - Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik - have been pushing for the deal to include Rosneft stock.

Another source close to the sale talks said there was "no way" that AAR would get shares, however, and that Rosneft's priority was to complete the BP leg of the transaction without a hitch. A full takeover would transform Rosneft into the world's largest listed oil producer.

Rosneft has made progress in talks with foreign banks on raising loans totalling $33.5 billion, or possibly more, to fund the takeover, bankers told Thomson Reuters LPC on Wednesday. .

In addition, four or five Russian banks would lend around $1 billion each to Rosneft, which itself would commit $7.5 billion in cash to the transaction.

COURT CASE

The de-escalation nullifies the threat of possible damages claims against BP that the TNK-BP board might have approved, with AAR's support, after the British oil firm's failed attempt last year to strike a strategic alliance with Rosneft.

AAR won an injunction in the UK courts against the BP-Rosneft partnership, which was later abandoned, arguing that the pact violated an exclusivity clause in the TNK-BP shareholders agreement.

Uncertainty persists, however, regarding an appeal hearing a $3 billion damages award to minority shareholders in TNK-BP's listed subsidiary, TNK-BP Holding, that will be heard by a Siberian appeals court on Friday.

Sources speculated that the minority shareholders, led by plaintiff Andrey Prokhorov, may reconsider their suit - also over last year's BP-Rosneft deal - as it would put them at odds with Kremlin-backed Rosneft.

They also noted that, should the judge find in favour of the plaintiffs, BP would be required to pay. Lawyers for both sides declined comment on the case, which lawyers for BP have in the past dismissed as "absurd".

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