IN BRIEF: Russia said on Wednesday it sold a 19.5% stake in oil giant Rosneft for 10.5 billion euros ($11.3 billion) to a consortium formed by Glencore PLC and Qatar. The latest privatization move by Russia will bring in the much-needed cash to fill a hole in its budget left by the economic slowdown and sanctions.
Russian President Vladimir Putin and Rosneft CEO Igor Sechin discussed the Rosneft deal in a meeting late Wednesday, according to a transcript on the Kremlin’s website.
A Kremlin spokesman, Dmitry Peskov, described the deal as the largest sale and acquisition in the global oil and gas sector in 2016.
Rosneft which puts out almost 5 million barrels a day, was in talks with over 30 potential buyers from American, Europe, Asia and the Middle East.
Glencore's Rosneft Deal
Rosneft has a market value of $59.17 billion, however, the deal was done with a 2% discount to the market price.
As per the terms of the deal, Glencore and Qatar’s sovereign fund will take equal shares of the 19.5% stake in Rosneft. Moreover, the Russian state will retain a controlling stake in Rosneft, which is partly owned by British oil company BP PLC.
London-listed commodity trader Glencore released a statement saying it would finance part of the deal by paying 300 million euros of its own equity, and the rest will be funded by banks and by the Qatari sovereign fund, the Qatar Investment Authority.
The commodity trader Glencore has a debt towering $30 billion amid low commodity prices. It announced plans to resume dividend payments in 2017 after suspending them in September 2015 to conserve cash. The dividend freeze was a part of a $10 billion debt reduction plan, which also covered asset sales.
Glencore’s stake gives it access to Rosneft’s crude oil volume of 220,000 a day. It would come on top of a five-year offtake agreement with Rosneft to buy 180,000 barrels a day.
Glencore has a long-standing history of trading with Russia. Back in the early post-Soviet period, Glencore bartered Russian oil for Cuban sugar. The commodities trader has also forged close ties with Russian oil companies, aluminum makers and agricultural firms under CEO Ivan Glasenberg.