By Scott Patterson And Alexander Kolyandr
MOSCOW--Swiss mining giant Glencore PLC is negotiating a deal to
restructure its stake in RussNeft, one of Russia's 10 biggest oil
companies, according to a person familiar with the deal.
Glencore plans to convert assets it has in RussNeft subsidiaries
into a 49% stake in the Russian firm's holding company, the person
said. No cash will change hands in the deal, the person said.
RussNeft's owner, Mikhail Gutseriyev, said Wednesday in an
interview with state TV Rossiya24 that he will retain ownership of
51% of RussNeft shares, while Glencore will own the rest. Glencore
will get several seats on RussNeft's board after the deal is
completed, the person familiar with the agreement said.
The two companies are in the process of signing the deal and are
now waiting for an approval from the Federal Anti-Monopoly Service,
Mr. Gutseriyev said. He didn't disclose the value of the
transaction.
It wasn't immediately clear why Glencore would choose to
consolidate its holdings in RussNeft. One potential benefit is that
it could help Glencore sell its RussNeft holdings more quickly if
it felt the business had become too risky amid plummeting oil
prices and ongoing tensions between the U.S., Europe and Russia
over the Ukraine crisis.
It would also likely give Glencore Chief Executive Ivan
Glasenberg greater influence over the direction of RussNeft. "It's
easier to exercise control if one can do it through a single entity
rather than through indirect ownership through multiple entities,"
Sanford C. Bernstein analyst Paul Gait said.
Founded in 2002 by Mr. Gutseriyev, RussNeft became one of
Russia's top-10 oil producers by snapping up a series of smaller
producers. In 2007, dogged by allegations of tax fraud in Russia,
Mr. Gutseriyev fled to London and agreed to sell RussNeft to
Russian metals magnate Oleg Deripaska. The deal was never
completed, and Mr. Gutseriyev returned to Moscow in 2010 after the
tax-fraud charges were dropped.
Glencore owns some minority stakes in RussNeft production units
and is a major lender to the company, which produces mainly in
Siberia and the Volga region.
Under a 2013 refinancing deal, Glencore agreed to convert a
minimum of $900 million into RussNeft equity in 2014, according to
a March regulatory filing by Glencore. But no deal was reached and
the conversion terms have been extended.
RussNeft will produce the equivalent of 132 million barrels of
oil a year, Mr. Gutseriyev said in the TV interview. He said he
didn't want to sell any of his stake in the company as it is
undervalued because of oil prices that have halved in the past nine
months.
"Glencore is insistently demanding that we convert," Mr.
Gutseriyev said, appearing to refer to the debt-for-equity
swap.
Write to Scott Patterson at scott.patterson@wsj.com and
Alexander Kolyandr at Alexander.Kolyandr@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires