REVIEW: AAR courts BP shareholders ahead of talks on TNK-BP sale
MOSCOW. July 17 (Interfax) - The Russian shareholders of oil company TNK-BP , the Alfa-Access-Renova consortium (AAR), have held a series of meetings with shareholders of BP, with which AAR will begin negotiations next week on the possible purchase of the British major's half of TNK-BP. AAR is thus trying to nudge the British toward changing the ownership arrangement of the joint venture, which analysts reckon could cost $20 billion-$35 billion depending on the impact of the shareholder dispute. Furthermore, it is still a question as to who will ultimately be the seller, as AAR is not opposed to selling its stake in TNK-BP in exchange for shares in BP and cash.
TNK-BP shareholder Mikhail Fridman and AAR chief executive Stan Polovets held a series of meetings in the United States last week with representatives of investment funds and companies that hold shares in BP, a source close to AAR told Interfax. Several weeks earlier, the members of the AAR consortium held similar meetings with BP's largest shareholders in London.
These meetings concerned the corporate governance situation at TNK-BP, raising the issue of the need to change the ownership structure of the company, 50% of which is owned by AAR and the other 50% by BP.
Polovets told Interfax that "the current 50-50 ownership arrangement at TNK-BP has completely outlived its usefulness and we openly said this to BP's shareholders. I think they understand this quite well."
The meetings also discussed dividend payments by TNK-BP, which have been suspended since the beginning of the year. "TNK-BP dividends are very important for BP shareholders," an Interfax source familiar with the talks stressed. BP paid its shareholders $4.1 billion in dividends last year, of which $3.7 billion or more than 90% came from TNK-BP.
A source close to TNK-BP said that dividends for the second quarter of 2012, like for the first quarter, will probably not be paid and that this situation would continue at least until a third independent director is appointed, because the board of directors with its current 10 members is not authorized to make decisions on quarterly dividends. "Considering the fact that the process of looking for a third independent director has not even begun, it is highly likely that TNK-BP will not pay dividends for 2012," he said.
The price tag
Analysts surveyed by Interfax believe a 50% stake in TNK-BP could be worth anywhere from $20 billion to as much as $35 billion, depending on the impact of the dispute between the oil company's shareholders.
Most analysts reckon that 50% of TNK-BP could be worth about $30 billion. Troika Dialog values the whole company at $58 billion, and 50% of the company at $30 billion. Analysts at Otkritie believe half of TNK-BP is worth $31 billion.
VTB Capital has the highest valuation for 50% of TNK-BP: $35 billion. VTB Capital analyst Alexander Kirevnin believes that the dispute between TNK-BP's shareholders does not affect the value of the company. "In terms of market quotations, [disputes] certainly have an impact. There shouldn't be an impact on the fundamental value of the company," he said.
However, Vitaly Kryukov of IFD Kapital believes that the lawsuits that AAR has brought against BP do have an impact on the company's value. "In its offer, AAR will certainly subtract its claims in the lawsuits," he said. He puts the fair value of half of TNK-BP at $20 billion-$30 billion not taking into account risks.
"The minimum is $20 billion and the maximum is $30 billion for 50%. But this is not the buyer's price. It's obvious that AAR is not even thinking, and hasn't thought of offering this kind of money. BP is probably going by approximately such valuations, but AAR clearly wants to go lower, far lower," Kryukov said.
Renaissance Capital analyst Ildar Davletshin agreed that the disputes between the shareholders could have an impact on TNK-BP's value. He reckons the fair price of the company in the absence of disputes is $25 billion-$30 billion.
"If we're talking about the purchase of 50% by a strategic investor, then for him the price is higher on the condition that he can end this dispute, that is, $25 billion-$30 billion if there is no dispute. If there is a dispute, then it is of course 20-30% lower due to slower decision making, the inability of approving certain strategic decisions," Davletshin said.
The Guardian also reported that BP will begin negotiations with AAR this week on the sale of its stake in TNK-BP and could earn up to $30 billion from the deal according to "independent analysts."
Dog in the manger
However, in early July Fridman said that the "estimate of $25 billion-$30 billion that some analysts believe BP could earn from the sale of its stake in TNK-BP is unrealistic."
"We don't see a single serious buyer who could pay BP such a large premium to the market price, which is currently about $20 billion for 50% of TNK-BP," Fridman said.
AAR earlier offered BP two options for resolving their latest dispute: the purchase of 25% of TNK-BP from BP "at a market price" or the exchange of its stake in TNK-BP for a small stake in BP (about 10%) over a period of 5-7 years plus cash.
But, as Fridman said earlier, BP has rejected all AAR offers, and at the beginning of June said that it had received an offer from a potential buyer for its stake in TNK-BP and would consider it. Fridman said AAR doubts that BP has a serious buyer. For example, AAR has not been approached by a potential buyer for permission to review the terms of the shareholder agreement.
The consortium intends to make an offer to BP to enter into negotiations on the purchase of its stake in TNK-BP within 45 days, that is by July 19, as stipulated by the shareholder agreement. Under the terms of the shareholder agreement, BP cannot enter into negotiations with third parties on the sale of its stake in TNK-BP for a period of 90 days after this date.