LUKOIL called the reason of refusal from participation in the privatization of...

LUKOIL called the reason of refusal from participation in the privatization of “Bashneft”

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Photo: Martin Divisek/Bloomberg

According to the Vice-President of LUKOIL Leonid Fedun, the amount, which was valued the government’s stake in Bashneft was too high for the company. “Rosneft”, according to the government, buy assets for $5.3 billion

LUKOIL refused to participate in the privatization of the controlling stake of “Bashneft” (50,0755%) because of too high prices, said Vice-President of LUKOIL Leonid Fedun.

“The price of $5 billion high for LUKOIL,” said Fedun, noting that this amount does not fit into the economy of the company (quoted by “Interfax”).

“We have an understanding of a fair price. For our company it is expensive. For “Rosneft”, which the entire profit will be taken by the state, no matter what price to pay,” added Fedun.

Fedun also said that LUKOIL does not intend to leave number of shareholders of the company “Bashneft-Polyus” (LUKOIL belongs 25,1%), leading the development of the fields name Trebs and Titov in the Nenets Autonomous district. “There is a shareholders’ agreement legislatively. I hope that “Rosneft” will carry it out,” said Fedun.

In the spring of 2016 Fedun saidthat LUKOIL does not intend “to be killed” for “Bashneft”, the cost of which, according to him, given the multipliers exceeded the cost of the LUKOIL. Co-owner and President of LUKOIL Vagit Alekperov in an interview to RBC in June said his company is ready to participate in privatization of “Bashneft” only subject to the availability of “reasonable rates”.

Alekperov noted that the price of shares of “Bashneft” under the influence of the speculative factor increases with “astonishing” speed. “At the start of privatization in January, “Bashneft” (100% of the shares. — RBC) was worth $4 billion today already more than $7 billion a growth of capitalization showed no company in the energy sector, i.e. the market has a speculation,” — said Alekperov.

The head of LUKOIL has explained the attractiveness of the purchase of “Bashneft” the presence of two companies of joint programs, “integration issues” and cooperation experience. However, later experts “Atona” has statedthat the synergies in case of acquisition of “Bashneft” LUKOIL amounted to $1.9 billion (118.4 billion USD), whereas in the case of “Rosneft” synergies will be $2.6 billion (about 160 billion rubles). Bank Intesa, consultant on privatization of Rosneft had evaluated the synergistic effect in case of purchase of a state-owned company Bashneft in 150-180 billion rubles.

Rosneft has historically consolidated the Russian refineries with a low depth of processing than LUKOIL, so the benefits of getting access to the best in the sector of processing cluster of “Bashneft” are more important to this company, which will significantly improve the profitability of processing, the report says “Aten”. The total synergy effect, connected with the processing, according to estimates, this investment will amount to $1.8 billion in “Rosneft” compared to $1.1 billion from LUKOIL.

Larger synergy Rosneft has more reserves for potential award, which it could offer for “Bashneft”, pointed the experts of “Aton”: deal with “Bashneft” will contribute to the growth of shareholder value Rosneft at a price of up to 4.8 thousand rubles. per ordinary share in Bashneft, and LUKOIL, the purchase would be “devastating” for shareholder value once the price would have exceeded 4.3 thousand RUB per share.

Based on the orders of Prime Minister Dmitry Medvedev, Rosneft buys of 50.08% Bashneft for 329,69 billion rubles ($5.3 billion) based 3706,4 RUB per common share. Tuesday ordinary shares of “Bashneft” on the Moscow stock exchange was trading at 3080,5 RUB apiece (13:13 MSK).