30 Jul 2010 15:20

Potential Lukoil share-buys from Conoco limited to 5%

MOSCOW. July 30 (Interfax) - If Lukoil does not exercise its preemptive right to buy its own shares from ConocoPhillips, the U.S. company will not sell Lukoil shares to any investor that would thereby garner 5% or more of the Russian company's charter capital, Conoco said in a statement for the U.S. Securities and Exchange Commission.

The two companies struck an agreement July 28 by which Lukoil would buy up 7.6% (64,638,719 shares) of its stock for $3.44 billion. Those shares represent 40% of Conoco's 163.3-million-share holding of Lukoil stock. LUKOIL Finance Ltd, a wholly owned Lukoil subsidiary, inked the agreement with Springtime Holdings Ltd (affiliated with ConocoPhillips) to acquire Lukoil shares at $53.25 per. The deal is slated for completion August 16.

It also provides Lukoil with the option to acquire up to 98,728,900 (11.61%) shares in the form of depository receipts before September 26.

Conoco also announced it might sell some Lukoil stock on the free market before the end of next year. According to the agreement, the Lukoil share price would be at least $55 per until September 27, and at least $53.25 until January 1, 2011. The agreement says the maximum amount of Lukoil stock to be sold via exchange is not to exceed 5 million shares in any month. Lukoil has preemptive rights to buy up the shares.

Conoco acquired the Russian government's 7.6% stake in Lukoil for $2 billion in 2004. The two companies later announced creation of a strategic alliance and said the U.S. company's stake would be increased to 10% and later to 20%, which occurred late in 2006.

ConocoPhillips announced plans to reduce its stake in Lukoil to 10% from just over 20% in the first quarter of 2010. Conoco sold shares to Lukoil in April for $274 million, reducing its stake to just under 20%. Lukoil President Vagit Alekperov had said repeatedly that his company did not plan to buy back its shares from ConocoPhillips.