Yukos to dissolve Sibneft merger

Yukos Oil, Russia's biggest oil producer, agreed to dissolve its $ 13.9 bn takeover of Sibneft after a dispute over management of the combined company scuttled the country's largest merger. The companies agreed to a new transaction that lets Sibneft shareholders repurchase the 92 % of Sibneft they sold to Yukos, with Yukos receiving the cash and shares it paid for the stake, Deputy CEO Yuri Beilin said. Details of the accord are being discussed. Sibneft won't have to pay a $ 1 bn break-up fee, Beilin said.
Cancelling the merger may open the way for companies such as ExxonMobil to buy stakes in Yukos and Sibneft as international oil producers look for Russian assets to reduce their reliance on Middle East oil.

The Yukos-Sibneft takeover collapsed after former Yukos CEO Mikhail Khodorkovsky was jailed Oct. 25 on fraud and tax evasion charges.
"Unwinding the merger is going to take three months at the least," Kaha Kiknavelidze, an analyst at Moscow-based brokerage Troika Dialog, said. "There isn't even any real agreement on the terms of the divorce."
Yukos is asking Sibneft shareholders to pay an unspecified amount of interest on the $ 3 bn in cash it paid for part of the Sibneft stake, Beilin said.

Yukos agreed to buy Sibneft in April, two months after BP announced plans to invest at least $ 6.75 bn in a joint venture with Russia's Tyumen Oil Co. In July, Russian prosecutors began an investigation of fraud and tax evasion by Yukos subsidiaries. Yukos completed the purchase of 92 % of Sibneft on Oct. 3, paying $ 3 bn in cash and 26 % of its shares. Khodorkovsky, Russia's richest man, was arrested Oct. 25, and prosecutors later froze a 40 % stake in Yukos.
Roman Abramovich, 37, Sibneft's biggest shareholder, stalled the merger on Nov. 28 by demanding the right to name the top managers of the combined company, contrary to the sales agreement.
"We aren't talking about cancelling the original transaction; we are talking about a new deal," Beilin said. "We are discussing the saleof an asset that is on Yukos's balance sheet."

Yukos plans to include Sibneft's profit in its fourth-quarter earnings, CFO Bruce Misamore said. At a Sibneft shareholders meeting, Yukos voted to change the company's management and eliminate the post of president held by Eugene Shvidler, Beilin said.
Prior to Khodorkovsky's arrest, ExxonMobil was in talks to buy a stake in Yukos, Russian President Vladimir Putin said in October. After Abramovich met with Kremlin officials in November, Sibneft demanded its president serve as CEO of the merged company.
"Any final confirmation that Sibneft has managed to escape the gravity of the Yukos black hole is good news for the stock," Moscow-based Renaissance Capital said in a noted to investors. "We still expect that Sibneft will end up in foreign hands sometime over the next 12 months."

Yukos officials said they were in talks with international oil companies about possible alliances.
"We never stopped our talks with American or other potential partners, irrespective of what was happening to the deal with Sibneft," Yukos shareholder Leonid Nevzlin said.
Khodorkovsky in September said Yukos was in talks about cooperating with international companies including ExxonMobil and ChevronTexaco. ExxonMobil had signalled it was still interested in buying a stake, people familiar with the matter said.
Reversing Yukos's acquisition of Sibneft may take many months, Nevzlin told. Nevzlin is the second- biggest shareholder in Group Menatep, which controls 44 % of Yukos.

Khodorkovsky's arrest followed four months of police raids on Yukos's offices, its lawyers and an orphanage the company supports. Khodorkovsky owns shares in Yukos through Menatep, whose chairman Platon Lebedev was is also in jail awaiting trial of fraud charges. Menatep shareholder Vasily Shakhknovsky was charged with income tax evasion, and Nevzlin fled to Israel.
Yukos may have agreed to the break-up to win the help of Sibneft's owners as the company seeks to resolve the investigations into its operations and owners, analysts said.
"Yukos seems to have accepted everything Sibneft demanded," said Stephen O'Sullivan, head of research at Moscow-based United Financial Group. "You have to think there will be some political advantage accruing to Yukos in return. Perhaps it will cool the temperature of the Kremlin-Khodorkovsky dispute."

Yukos shares have dropped 35 % since Khodorkovsky's arrest, reducing the company's value by $ 13 bn. Khodorkovsky resigned as CEO after his arrest. Russia's Tax Ministry said this month Yukos may owe $ 5 bn in unpaid taxes and penalties, a claim Yukos said is based on allegations that have already been rejected by the courts. Khodorkovsky plans to file a complaint with the European Court of Human Rights over his imprisonment, a lawyer representing him said earlier this month.
Khodorkovsky's pre-trial detention, political pressure on judges and the likelihood he won't get a fair trial are examples of how Russia has violated European Convention norms, attorney Robert Amsterdam said.