CEFC paid QIA and Glencore only $ 225 million for disrupting the transaction on Rosneft shares

The Swiss trader and the Qatari fund expected to receive $ 400 million for the termination of the transaction to acquire a 14.2% stake in Russia's largest oil company.
The unsuccessful bidder for the purchase of a 14.2% stake in Rosneft, the Chinese CEFC, paid the consortium of Qatar QIA and Swiss Glencore € 225 million for the cancellation of the deal. The latter fell in May after the appearance of criminal claims by the PRC authorities against the founder of CEFC, Ye Jianming. Initially, in June, the head of Glencore, Ivan Glasenberg, talked about significantly greater compensation, $ 400 million. However, experts say, QIA and Glencore still eventually earned at least € 2.4 billion on the growth of the stock price and Rosneft dividends.

The Chinese CEFC, which this year was unable to close the acquisition of 14.16% of Rosneft’s shares from the QIA Qatar investment fund consortium and the Glencore trader, paid € 224.8 million for the termination of the transaction, QHG Holding reports ( "). QHG Holding is one of three British partner companies created by Glencore and QIA to buy a 19.5% stake in Rosneft for € 10.2 billion during the privatization of a Russian oil company at the end of 2016. Glencore declined to comment, QIA did not respond to the request of “Kommersant”.

Two years ago, the privatization deal went through several stages and, despite Vladimir Putin’s demands for transparency in the sale of the stake, was extremely difficult to structure. Then the main part of the sold package of Rosneft of 14.16% QIA and Glencore jointly acquired loans of some Russian banks of € 2.2 billion and Italian bank Intesa Sanpaolo of € 5.2 billion, and the purchased shares were pledged.

But the scheme did not look trouble-free. At first, due to Western sanctions, Intesa was unable to syndicate the loan, which, according to Kommersant, turned out to be more expensive than planned. And the strengthening of the euro against the dollar and the ruble led to the fact that even the increased dividends of Rosneft did not cover the loan payments (see “Kommersant” of May 5).

It was assumed that 14.2% of Rosneft’s shares from QIA and Glencore would be bought by the Chinese CEFC for approximately $ 9 billion, the deal was announced in September 2017. CEFC also received a Rosneft contract for the supply of 10 million tons of oil within five years, which, according to a Kommersant source close to the oil company, is still in force. To acquire the package, VTB opened a credit line of € 5 billion, but the stock transaction was terminated in May of this year due to the financial problems of CEFC and the criminal prosecution of company founder Ye Jianming.

In June, the head of Glencore, Ivan Glasenberg, said that CEFC's compensation is close to $ 400 million, but as of the day of the announcement of the termination of the transaction in May, the reported amount of € 224.8 million corresponded to only $ 270 million.

As a result, after the deal with CEFC was broken, the final buyer of the stake was QIA, which increased the stake in Rosneft to 18.93% of the shares. The fund paid Glencore € 3.7 billion, the trader left only 0.57% of the shares. According to Reuters sources, VTB also took part in crediting the deal, but at the bank and Rosneft itself it is categorically denied.

Despite the fact that, as a result, the compensation turned out to be lower than the Glencore declarations, the transaction can be considered profitable for the buyers of securities. Now the value of the shares of the oil company, bought by Glencore and QIA, is € 11.72 billion, that is, more than € 1.5 billion higher than the transaction price of € 10.2 billion, notes Vasily Tanurkov from ACRA. In addition, for 2017-2018, dividends of 64.15 billion rubles, or € 856 million at the current rate, are accrued on these shares, the expert adds. Thus, in two years, buyers earned about € 2.38 billion, or 23.4% (15% due to the growth in the value of the package, 8.4% - dividends). Since the privatization, Rosneft has twice raised the minimum dividend, first to 35% and then to 50% of net profit under IFRS. Also, Mr. Tanurkov clarifies, as part of the transaction, Glencore received a contract for the sale of oil in the amount of 220 thousand barrels per day, which earned € 100–200 million over two years.