Rosneft's $55 Billion TNK-BP Deal Seen Closing in March

March 13, 2013

Dow Jones reports that a $55 billion transaction in which Russian state-controlled OAO Rosneft will acquire TNK-BP from BP PLC (BP.LN) and the AAR consortium of Soviet-born tycoons is expected to close by the end of the month, three people familiar with the matter said this week.

The deal will transform both companies: it will make the British oil giant a one-fifth holder of the Kremlin's oil champion, while Rosneft will end up controlling about one-third of crude output in Russia, cementing its position as the world's largest publicly traded oil company.

BP hopes the deal will give it access to the Russian Arctic and other potential prospects such as the massive Bazhenov shale-oil resources in western Siberia.

Approval from the European Union's antitrust authorities Friday for the deal was the last major hurdle to be cleared and the transaction will close once the lawyers have finished due diligence on the documentation, the people said.

"There aren't any other major unresolved issues outstanding--there's a lot of technical work to be done for a transaction of this size, but it's all going very smoothly," one person familiar with the matter said.

The loan financing has yet to be drawn down, and that will take place once the contracts are completed and signed, said a loan financier on the deal.

The two companies had originally said they expected the deal to complete in the first half of 2013.

Rosneft's takeover of TNK-BP marks a major milestone in President Vladimir Putin's reassertion of Kremlin control over oil production, much of which was sold off under the privatizations of the 1990s to well-connected tycoons like AAR's owners. Since Mr. Putin came to power in 2000, the tide has turned in an industry the Kremlin depends on both as a source of international influence and more than half of all tax revenues.

The transaction also enables BP to reap a windfall from the sale of its stake in Russia's third-largest oil producer, which it paid around $8 billion for in 2003 but which has returned around $19 billion in dividends.

The deal is a vindication for BP Chief Executive Bob Dudley, who suffered a major setback last year when his previous effort to partner with Rosneft in Russian oil exploration was blocked by opposition from AAR.

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