The state-held 75% stake in Slavneft, one of Russia's largest oil companies, has been sold to a partnership led by its privately owned competitor Sibneft. With several would-be contenders barred from bidding, the final $1.86 billion price scarcely reflects the company's true value.
The Slavneft has been sold at auction to Invest Oil, a finance vehicle that is the front for Sibneft and its partner TNK. Slavneft initially was a joint venture between the Russian and Belarusian governments. Sibneft and TNK now have full control of the company, after Sibneft also bought the Belarusian government's 10% stake earlier this month.
In fact, that earlier acquisition all but ruled out the participation of several potential bidders, such as Russia's largest oil company Lukoil. Together with the 15% stake already held in trust by its partner TNK, the 10% Belarusian shareholding gave Sibneft the "blocking minority" status and hence an effective veto over all significant managerial and investment decisions. Any successful bidder for the 75% stake would have had to buy Sibneft and/or TNK out, to have a free hand in running the company - and that would not have come cheap.
China's CNPC was seen as the strongest contender, however, Russia's Privatization Fund ruled the company out, citing its state-owned status. The main concern was probably that CNPC could mothball Slavneft's mid and downstream operations and export the crude oil to its refineries in China. This debacle then forced the Russian government to rule out the rumored $2.5 billion bid submitted by Rosneft, which is majority-owned by the Russian government itself. There was no clear explanation why four other bids were also ruled out late.
With only two bidders, the final price of $1.86 billion was only marginally higher than the $1.7 billion reserve price, even though Russia's Auditing Chamber estimated its true value at nearly $3 billion. Suggestions from the media were that Sibneft had pulled some strings with the government to secure a cheaper price. Still, Russia's stake fetched 25% more, proportionately, than Belarus', which went to Sibneft for $210 million.
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