Things are hotting up over what's to be done with BP's 50% stake in the TNK-BP JV. Reports today that the Russian AAR consortium, which owns the other half of the JV, are preparing an all cash offer for BP's stake.
This comes after state-owned oil major and Siloviki Igor Sechin's plaything Rosneft offer the British company a cash-and-shares deal to buy the stake that would have handed BP a 12.5% in Rosneft and between $10bn-$20bn in cash.
One week ago, BP's CEO Robert Dudley and its chairman Carl-Henrik Svanberg, together with Rosneft's CEO Igor Sechin, met with Russian President Vladimir Putin. The main topic of the meeting was the discussion of a Rosneft-BP deal (which would involve Rosneft buying BP's stake in TNK-BP), which was supported by Putin. Under this deal structure, after selling its stake in TNK-BP to Rosneft, BP would then spend some of the cash on purchasing Rosneft shares from the state. Bloomberg reported on 19 Sep that Rosneft was seeking $15bn in loans to finance its part of the deal.
However, under the terms of the JV shareholder agreement AARs has first dibs on any deal concerning the BP stake, who has to give the Russian side 90-days to engage in 'good faithÓ negotiations. This period is due to expire on October 17, according to reports.
Until now AAR was thought to have offered $7bn-$10bn for half of BP's stake (ie 25% of the company). This would have left BP in the JV but as a minority investor and in a significantly weakened position. Given Rosneft was offering to buy the entire stake this was clearly the better offer and so BP has no obligation to accept AAR offer.
However, the new offer changes the game as BP will have to accept it if it on a par with Rosneft's forcing Sechin to improve his offer - something he will not be happy about.
'Bottom line, we do not believe that AAR's bid will be any better than Rosneft's offer. The terms offered by Rosneft imply the creation of strategic alliance between it and BP and the joint development of Arctic projects - an option which is not available with AAR. Furthermore, we doubt that AAR will be able to raise enough money to beat Rosneft's price,Ó said Elena Savchik from Aton in a note.