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Global Capital

Russian Oil Firm Makes Strong Entry

Rosneft's initial public stock offering raises $10.4billion, but rival Yukos is trying to use litigation to derail the firm's market debut.

July 15, 2006|From Reuters

MOSCOW — Russian oil firm Rosneft said Friday that its initial public stock offering raised $10.4 billion, half of it from a handful of buyers including oil giant BP, but a British court challenge from rival Yukos Oil Co. threatened to delay its market debut.

Russia is keen to make a splash with the share offering as it hosts its first summit of the Group of 8 leading industrialized nations this weekend. By selling shares of the state-controlled firm to the likes of BP, analysts say President Vladimir V. Putin wants to allay concerns that the Kremlin is tightening its grip over oil assets amid global fears over energy security.

Rosneft said the IPO, priced at $7.55 a share, gave Russia's No. 3 oil firm a market capitalization of $79.8 billion, a premium to the bigger Lukoil.

The stock rose 5% in London in conditional trading, which becomes official when the listing formally commences, valuing the company at $84 billion.

But as Rosneft's bankers toasted the sale in Moscow, Yukos spokeswoman Claire Davidson said in London that the company was seeking a temporary injunction to postpone the IPO before Rosneft's shares make their market debut Wednesday.

Yukos has threatened litigation after its key unit, Yugansk, was seized and sold at a state auction to pay for more than $33 billion in back taxes. Yukos said the seizure was part of a Kremlin campaign against the company and its politically ambitious founder, Mikhail Khodorkovsky, who was jailed for tax evasion and fraud. Rosneft bought Yugansk in 2004.

Lawyers familiar with the matter said Yukos was seeking to invoke Britain's 2002 Proceeds of Crime Act, which makes it unlawful for anyone to facilitate the retention of proceeds of crime, and targets money launderers, smugglers and drug dealers.

Rosneft spokesman Nikolai Manvelov dismissed the threat. "Our lawyers consider that suits and court cases like that have no effect whatsoever" on the stock sale, he said. Rosneft, which sold about 13% of its stock, said four investors, including oil and gas firms, would together buy around half of the IPO.

London-based BP, which owns half of Russia's No. 2 oil firm TNK-BP but has separate joint projects with Rosneft, said it bought $1 billion of Rosneft stock. A market source said China National Petroleum Corp. was allocated shares worth about $500 million. Bankers said Malaysia's Petronas also bid.

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