Rosneft buys Morgan Stanley’s international oil merchanting business

Rosneft Oil Co. and Morgan Stanley have signed a binding agreement allowing Rosneft to purchase the global oil merchanting unit of Morgan Stanley’s commodities division. The sale includes access to an international network of oil storages, crude oil and products inventories and related off-take and customer contracts, freight shipping agreements and equity investments into infrastructure, international marketing and research businesses.

Approximately 100 front-office executives dedicated to oil and products merchanting in the US, UK and Singapore (approximately one-third of Morgan Stanley’s total commodities merchanting personnel) along with 180 mid- and back-office executives will become part of Rosneft as part of the transaction. The transfer of all supporting systems and processes is an integral part of the agreement. This includes a first in class approach towards managing market risk, trading controls and adhering to regulatory compliance.

Morgan Stanley’s non-controlling 49% stake in Heidmar Holdings, which manages pools comprising a fleet of approximately 100 independently owned commercial tankers, is among the oil-related investments being transferred to Rosneft. The transaction does not include Morgan Stanley’s current client business related to oil and products merchanting, or its ownership stake in TransMontaigne or any of its commodities operations outside of the oil and products sector

“The agreements reached today represent a breakthrough in strengthening Rosneft’s commerce and logistics unit, which will spearhead the company’s growth in the international oil and products markets creating substantial incremental synergies based on Rosneft’s unique position as the leading oil and gas company and Morgan Stanley’s global merchanting unit’s geographical reach and depth of supplier – customer commercial relationships,” said Igor Sechin, Rosneft president and chairman of the management board. “The transaction will deliver increased value for Rosneft’s equity barrels by going deeper into the merchanting value chain, while equally enhancing the visibility of global oil and products markets and opening up new revenue streams by accessing third party barrels.”

The transaction is subject to, among other conditions, regulatory approvals in the US, the European Union (EU) and certain other jurisdictions. It is targeted to close in the second half of 2014.

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