By ALEXIS FLYNN
LONDON -- BP and its Russian partners, the Alfa Access
Renova Group, confirmed Wednesday they have entered talks that
could result in AAR significantly increasing its shareholding
in their joint venture, TNK-BP, a move likely to kick off
complex negotiations over the future of the troubled firm.
brief statement, AAR said it would begin talks with BP that
could continue for up to 90 days.
BP also confirmed in a statement that talks had started over
the sale of its 50% stake in TNK-BP, Russia's third-largest oil
The talks potentially set up an end game for what has proved
to be a highly profitable, but tempestuous BP adventure in
Russia, one that could yet draw in other major players in the
country's state-dominated energy sector.
"AAR and BP both realize that a fundamental realignment in
the ownership of TNK-BP is necessary in order to allow each of
the shareholders to achieve its strategic objectives and
eliminate the internal contradictions that are preventing
further development of TNK-BP," said AAR CEO Stan Polovets.
BP said last month that it was considering selling its stake
in TNK-BP after receiving expressions of interest from unnamed
However, the TNK-BP shareholder agreement requires BP to
begin a period of exclusive negotiations with AAR, offering its
Russian partners the opportunity to buy its stake, before
soliciting interest from other interested parties, according to
a person familiar with the pact.
AAR, a group of Soviet-born billionaires that have long been
at odds with their British partners over how the company should
be run, has offered to buy half of BP's 50% stake.
BP has consistently rejected that proposal, saying it would
only be prepared to sell its entire interest in TNK-BP.
The formal start of talks with AAR gives BP the right to
start talking to other parties too, the person said. BP will
not be allowed to conclude a deal with anyone but AAR for 90
days, said the AAR statement.
If BP fails to reach an agreement with AAR after 90 days, it
will then be allowed to sell to an outside buyer, the person
Investors initially welcomed BP's decision to pursue a sale,
but doubts have grown in recent weeks about the impact of
selling an asset that accounts for nearly a third of BP's
production and has paid the British company $19 billion in
dividends since it was formed in 2003.
From the outset, BP and its partners have skirmished over
control of and strategy at the 50-50 venture. In 2008, Bob
Dudley, then CEO of TNK-BP, fled Russia under regulatory
pressure amid a conflict with AAR. He is now BP's CEO.
BP has sought for years to make deals with Russia's state
energy companies, which BP executives thought were the
Kremlin's preferred partners for the British company. But AAR
has stymied those attempts.
Last year, AAR successfully sued to block an alliance
between BP and OAO Rosneft, the state oil company.
Later, a deal in which BP and Rosneft would have bought out
AAR for about $32 billion in cash and stock fell apart at the
Bankers and analysts say AAR is positioning itself to
engineer a lucrative exit from TNK-BP, probably with a state
company - like Rosneft - coming in to take its place.
However, Mikhail Fridman, the billionaire who leads AAR,
recently told the Wall Street Journal that the government
doesn't want to see a state takeover of TNK-BP and would prefer
another major foreign oil company to step in if AAR and BP
can't resolve their differences.
No other foreign companies have publicly expressed their
Dow Jones Newswires