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Sistema Agrees to Buy 49% Of Russneft

Yevtushenkov Vedomosti

Sistema, billionaire Vladimir Yevtushenkov's holding company, said Friday that it reached an agreement to buy 49 percent of oil producer Russneft for no more than $100 million.

The final price will depend on whether Russneft meets a series of financial and operational targets, Sistema said. Closure of the deal is subject to a variety of other conditions, including approval from the relevant corporate structures, the results of a financial and legal audit, and approval from major creditors.

Russneft will need to complete a comprehensive restructuring of its debt, among other things, for the deal to be closed, a Sistema spokesperson said, declining to elaborate on when final approval might be reached.

As of Oct. 1, Russneft had loan debts of $6.3 billion, or roughly the same price that analysts have put on the entire company without counting its debt.

The oil producer's main creditor is Sberbank. Russneft has loans of $1 billion and 14.7 billion rubles ($497 million) due to the state bank in 2012, as well as $2.7 billion due in 2016. Its second-largest creditor is Intersil Limited, a firm affiliated with Swiss trader Glencore, to which Russneft owes roughly $1 billion by the end of this year.

The Sistema spokesperson declined to name a deadline for Russneft's restructuring.

Russneft and its owner, Mikhail Gutseriyev, could not be reached for comment.

The businessman founded Russneft in 2004. In the summer of 2007, after the company was hit with tax probes and two criminal cases were opened against him, Gutseriyev sold Russneft to Oleg Deripaska for about $3 billion and left Russia.

In late 2009, one of the cases against Gutseriyev, on tax charges, was dropped, and his acquaintances said he had begun thinking about returning to Russia. In January, Gutseriyev regained control of Russneft. Spokespeople for Deripaska's En+ Group said at the time that the deal was canceled because it did not receive approval from the state.

After that deal fell through, Sistema announced its interest. But because of Russneft's high debt level, Sistema is limiting itself to a 49 percent stake, although it could consider buying control after a debt restructuring, Yevtushenkov has said.

Sources close to Sistema and Russneft have said Sberbank may get a 1 percent stake from Gutseriyev. As early as 2006, there were discussions that Glencore — which has minority stakes in virtually all of Russneft's production assets — could receive an interest in the oil producer.

Sistema has been bolstering its oil portfolio, which now includes Bashneft and refineries in Ufa. Bashneft has annual production of about 13 million metric tons, while Russneft's yearly output is roughly 11 million tons.

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