The business community cheered after the Russian Anti-Monopoly Ministry gave its approval for the Yukos-Sibneft merger, despite ongoing investigations in Yukos? business transactions in the 90?s.
The merger will create on oil giant which controls almost 30 percent of the Russian oil production and pumps 2.3 million barrels of crude per day. With its reserves of 19.4 billion barrels, it is number three worldwide, behind Exxon Mobil and Royal Dutch/Shell but ahead of BP and Chevron Texaco. But the investigations into Yukos have cast a huge cloud over the pending transaction. However, the approval was connected with the claim that the new entity would have to adhere to certain behaviours. The company will be forced to process crude of other producers at their refineries if there is idle capacity. Furthermore, competitor products must be allowed market access to Yukos-Sibneft dominated markets. If the new company will build private pipelines, other companies must be granted access, according to their investments. At the moment, there are no private-owned pipelines in Russia but the claim refers to the $5 billion pipeline project from Western Siberia to the deepwater port of Murmansk. Both, Yukos and Sibneft are initiators of the idea. Private oil companies would finance the venture and in return would receive the ownership. This pipeline would allow the involved firms to boost export to Western European and US markets and thereby circumventing Transneft, the state owned pipeline monopoly. Yukos is also ready to co-sponsor a pipeline from Eastern Siberia to Dacqing in China to increase Asian exports. If the merged company fails to comply with these conditions, it will be forced to sell one of its Siberian refineries, Omsk, Achinsk or Angarsk.
Financial market saw the continuation of the merger as a sign that the conflict surrounding Yukos and its head Mikhail Khodorkovsky is easing. The RTS index, the main Russian stock index, led by oil and electricity companies jumped over the psychologically important mark of 500 on Friday. Brokers are confident that the rise will continue. Among the buyers were domestic as well as foreign investors. Yukos increased 2.11 percent to $14.01, Sibneft rose 4.44 percent to $2.59 and Lukoil ended up 3.26 percent higher at $19.00.
Despite the market euphoria about the merger approval, the at the beginning of July arrested Platon Lebedev, one of YUKOS? top shareholders, is still held in custody on suspicion of defrauding the state in a 1994 privatization deal. And the head of the Yukos? security department Alexey Pichugin is also still in jail, he is accused of a double murder. Investor can therefore only be warned that the merger decision should not be overstated. The antitrust authorities can act only within the Russian antimonopoly law and they have basically no power to stop the merger outright. The only thing they could have done in this case is to ask companies to divest certain assets. Probably, the Russian law agencies wanted to show that they adhere to the law. This will give them more scope in their disputed investigation against Yukos.
However, at the moment, the merger preparations will continue and already on Thursday Yukos started to issue new shares in order to support a swap with Sibneft shareholders. Under the agreement, a few key Sibneft shareholders will exchange 26.1 percent of the new entity in a 72 percent in Sibneft. Additionally, they will also receive $3 billion in cash for another 20 percent stake of Sibneft.
Author: Nana Bendukize
