AAR consortium likely to be viewed as 'foreign investor' in Russian antitrust approval

04.10.2012

PaRR (Policy and Regulatory Report) - A part of the Financial Times Group

  • 'Strategic Enterprise’ Russian regulatory clearance could be required in case of either bidder
  • FAS might issue early clarification if Rosneft bids
  • BP thinks something always comes out of the woodwork in Russian legal process

A stake purchase in Anglo-Russian oil major TNK-BP by Alfa-Access-Renova (AAR), the Russian consortium that already owns 50% of TNK-BP, would likely be treated as an overseas investment by the Russian competition authorities, according to people familiar with the situation.

Anton Sitnikov, a partner and the Head of Corporate/ M&A at law firm Goltsblat BLP, the Russian practice of Berwin Leighton Paisner, noted that “most likely the AAR consortium will be viewed as a foreign investor and thus, along with the customary antitrust clearance [by Russia’s Federal Antimonopoly Service, FAS], there will be required a clearance from the Governmental Commission on Foreign Investment into Strategic Enterprises.”

This position was confirmed by a person familiar with BP, the UK oil major that announced in June that it intended to sell its 50% stake in TNK-BP, following unsolicited expressions of buying interest from at least two separate parties.

Despite is Anglo-Russian ownership, TNK-BP is officially registered in the British Virgin Islands. Subsequent to the BP announcement that it was looking to sell its Russian assets, Russian state-owned oil company Rosneft (ROSN:RU) and AAR both publicly stated that they were interested in buying BP’s stake in TNK-BP.

Sitnikov said that the Russian antitrust and Commission on Strategic Enterprises approvals “usually takes between three and six months, but given the significance of TNK-BP, it will either adopt a fast track or may take longer than usual. I would expect the latter.” Asked if a different antitrust approval process would be involved if the stake was purchased by Rosneft, Sitnikov said that “while Rosneft is a Russian company, under the current reading of the Strategic Investment Law, one may still argue that it shall be viewed as a foreign investor’s group (as holding foreign subsidiaries) and shall also follow the aforedescribed route.”

Sale to Rosneft could see early clarification by FAS However, Sitnikov added that in the event of the BP stake in TNK-BP being sold to Rosneft, “in practice, one may expect a clarification to be issued by FAS confirming that no strategic clearance is required in this case. Under this scenario, the timing is likely to be one to three months required for the antitrust clearance process.”

A spokesperson for BP said that the company was “in ongoing discussions with interested parties” over the TNK-BP stake, but declined to comment further. It is understood that, given BP’s previous legal history in Russia, which at one point even saw the current chief executive (and then CEO of TNK-BK), Bob Dudley, moved to an undisclosed location for his own safety, and the fact that the company has been involved in a long-running legal disagreement with its partners AAR, the company believes that something always comes out of the woodwork when the group is involved in legal processes in Russia, and that the present situation is likely to be no exception.

Igor Sechin, the former Russian deputy prime minister and current president and chairman of the board of directors of Rosneft, will be in London to “meet investors”, according to Russian media reports, which were confirmed by the BP spokesperson. The spokesperson said that BP had no comment on whether the company’s representatives would be meeting with Sechin later this week.

by Oliver Adelman in London

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