LUKoil acquires Getty Petroleum Marketing
Russia's largest oil company LUKoil agreed to purchase retail gasoline chain Getty Petroleum Marketing for $ 71 mm in
cash in what was billed as the first purchase of a publicly traded US concern by a Russian company. LUKoil officials
said the purchase of Getty, which operates about 1,300 gas stations mostly in Northeast and Mid-Atlantic states, is
the company's first step in a planned long-term expansion into the US.
"We consider this a springboard to further acquisitions in the US," said Vadim Guzman, head of LUKoil's US operations. "We consider the US markets to be the largest petroleum market in the world." With the Cold War over for more than a decade, and US oil prices topping $ 2 a gallon in many areas, analysts and Russian experts in the US downplayed any symbolic impact of a Russian company gaining a foothold in an important US market.
"I suppose it's Russia coming of age, as it were. But if they want to sell us their oil, let's encourage them to do so," said Marshall Goldman, professor of Russian economics at Wellesley College and associate director of the Davis Centre for Russian Studies at Harvard University.
"In this case, the more sources of oil supply, presumably the happier we should be. They've got oil and they're looking for ways to market it," Goldman said. "They're exporting 40 % of what they produce, so let's take it." Goldman noted that the US was exporting oil from Russia throughout most of the Cold War era.
Under the terms of the deal announced, LUKoil agreed to pay $ 5 for each share of Getty common stock, which
represents a 54 % premium over Getty's closing price of $ 3.25.
LUKoil said several of Getty's principal shareholders, who own about 40 % of the company's outstanding shares, have agreed to sell their shares as part of the tender offer. "It's a rather interesting event, quite frankly, to see LUKoil making this move," said George Gaspar, an oil analyst with Robert W. Baird in Milwaukee. "It's going to give them a beachhead and provide them with a learning curve on how to market oil products in the US"
Gaspar said the acquisition may serve as a warning to US oil companies that competition from unexpected areas - namely Russia - is encroaching into their backyard. Getty's headquarters will remain in Jericho, New York, and no layoffs of Getty employees are expected, according to a statement issued by LUKoil.
LUKoil was created in 1992 by then-President Boris Yeltsin, and has been gradually privatised. The government holds a
15 % stake, with an estimated 20 % controlled by company managers and employees. The rest belongs to shareholders,
but management keeps tight control of the company.
LUKoil is a major taxpayer and has close ties with many top government officials -- its president Vagit Alekperov is a former deputy oil minister. But like several major corporations, it has also come under criticism for its closed business practices, and prosecutors filed tax evasion charges against LUKoil this summer.
Getty Petroleum Marketing was spun offfrom Getty Petroleum - now called Getty Realty -- back in 1997 to handle the parent company's petroleum marketing and heating oil businesses. Both are remnants of the oil empire built by J. Paul Getty, an oil magnate who was considered the richest man in the world at the time of his death in 1976.