New Star TNK-BP Holding Can Become the Main Blue Chip of Russia
17 Jan 2005
A new star is rising at the Russian stock market to replace the YUKOS shares for investors. This new star is TNK-BP, which shall become a public company following the restructuring process. According to analysts, a great future is reserved for the 7% of the Company shares that may appear at the market.
On Friday, TNK-BP announced its restructuring program aimed at simplifying the Holding company assets comprising over 600 companies and moving the profit center to Russia. TNK, SIDANKO and ONAKO (the shareholder’ meetings shall be held on March 1) are going to incorporate into TNK-BP Holding registered in the Tyumen Oblast (Region). Subsequently, the majority of other subsidiaries of the Group shall also be incorporated into TNK-BP Holding, the minority shareholders of which will be able to exchange their shares for those in TNK-BP Holding (see Picture), promised Robert Dudley, President of TNK-BP. According to Mr. Dudley, the new holding company will not comprise assets in the Ukraine, shares in Slavneft and RUSIA Petroleum or BP retail network in Moscow. “It would have been difficult to consolidate these assets: TNK-BP has partners with a substantial share in each of them; besides, we seek building a Russian company”, he explained to “Vedomosti”.
According to R. Dudley, the share of minority shareholders in TNK-BP Holding shall make slightly less than 7 %, if they all choose to exchange their shares. Mr. Potter promises that the holding company is going to be generous towards its shareholders – it plans to allocate up to 40 % of the net income for dividends and treat majority and minority shareholders equally; besides, financial indices of the new company shall be close to those of TNK-BP, without taking to note assets outside the holding company.
At the subsequent stage, TNK-BP Holding is going to be turned into a public company. R. Dudley assured that its shares should pass the listing at a Russian exchange; however, the company is not planning to pass the listing at foreign exchanges, added Kent Potter, CFO.
The stock market enthusiastically welcomed the TNK-BP plans. Immediately following their announcement, the Group enterprises shares circulating in the market surged and by the end of the day the capitalization of TNK at the RTS (Russian Commodities Exchange) grew by 13 %, Varyeganneftegaz – by 10 %, SIDANKO – by 15 %, Udmurtneft – by 17 %, Saratovneftegaz – by 33 %. RTS index, LUKoil and Surgutneftegaz shares grew by 1 %.
All the analysts interviewed by Vedomosti claimed they were going to encourage their clients to exchange their shares in the Group companies for shares in TNK-BP Holding. Investors are waiting for the placement of the Holding shares at the market predicting their great future. This is the third largest oil company in Russia in terms of oil production and it virtually has a guarantee against political risks by the fact that the company establishment has been approved by President Vladimir Putin, and the quality of the corporate governance is ensured by the BP reputation.
“No doubt, the TNK-BP shares shall become a new “blue chip” in the Russian market”, says Aleksei Dolgikh, the leading trader of Troika Dialogue. “It can not but cheer up investors, especially against the sunset of YUKOS” (see the article on page B1). “This is a huge oil company”, states Marlen Manasov, President of Brunswick UBS. “Investors are eager to buy the shares with a large premium merely for the alliance [with BP]”.
According to Manasov, the market value of the new company shall vary between Sibneft ($ 14.7 bln at RTS, as of January 14) and Surgutneftegaz ($ 26.4 bln). Dmitry Lukashov, analyst of Aton, also places the company at the market leaders level – about $ 25 bln. “The company has evaluated itself as $ 18 bln, but the markets give it a higher assessment”, he said. Ivan Mazalov, Director of Prosperity Capital, believes that the company value must be higher than that of LUKoil ($ 25.5 bln). “TNK-BP is smaller but better managed, more profitable and with a higher growth rate”, says I. Mazalov.
Meanwhile, the amount of securities free floating at the market is going to be enough for the “blue chip”. “7 % free float is a lot, more than that of Sibneft”, says D. Lukashov.
Even minority shareholders are happy. For a long time they used to claim that the owners of TNK and then TNK-BP withdrew profit from the Group subsidiaries to the main company using transfer prices. Alex Williams, Director of Vostok Nafta, called the shares exchange terms to be “more or less normal” and estimated the TNK-BP Holding shares growth rate potential to be at least 30 %.
In order to exchange the shares in TNK-BP subsidiaries for the share in TNK-BP Holding, shareholders must vote for incorporation of the subsidiary into the new company at the shareholders’ meeting. Exchange indices have been approved on the basis of the assessment carried out by Deloitte, which evaluated the overall TNK-BP Holding value to be RUR 517.8 bln, or $ 18.6 bln. Over 50 % of the value falls on TNK (RUR 292.5 bln); SIDANKO accounts for RUR 160.1 bln and ONAKO – for RUR 35.1 bln. As a result, one share in TNK will be exchanged for 2.66 shares in TNK-BP Holding, one ONAKO share – for 1.89 Holding shares, one SIDANKO share – for 23.49 Holding shares. Shareholders voting against the incorporation will be able to sell their shares in TNK at RUR 92.5, shares in ONAKO – at RUR 65.6 , shares in SIDANKO – at RUR 815.9. In Q3 of 2005, the main shareholder of TNK-BP Holding, Novy Investments Ltd. (Cyprus) plans to suggest that the minority shareholders of another 14 main subsidiaries of the Group exchange their shares for those in the parent company. Other assets shall not take part in the shares exchange.
All in all, the holding company may spend up to $ 100 mln on the shares buy-out, said Kent Potter, CFO of TNK-BP, in his interview to Vedomosti, as the Law on Joint-Stock Companies authorizes allocation of no more than 10 % of the net asset value for such buy-out.
Source: Vedomosti
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