Gazprom-Rosneft merger agreed

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The Russian government on Monday approved the plan for a merger between Gazprom, the country's giant gas monopoly, and Rosneft, the state oil company, raising hopes for an end to conflict between the two companies.

The Russian Ministry for Industry and Energy said the plan had been approved by state officials and heads of Gazprom and Rosneft. The merger should be completed by the end of June.

The latest plan follows weeks of bitter fighting between the companies about the future of the new energy company. Ten days ago, the two announced that 100 per cent of Rosneft would be swapped for 10.7 per cent in Gazprom, allowing the government to increase its stake in the gas monopoly to 51 per cent.

Alexei Miller, chief executive of Gazprom, had said that the merger would exclude Yuganskneftegas, the main production unit of Yukos acquired by Rosneft in a controversial auction last year.

According to Mr Miller, Yuganskneftegas would become a separate company run by Sergei Bogdanchikov, current head of Rosneft, believed to be a driving force behind the dismantling of Yukos.

However, a day later Mr Bogdanchikov accused Mr Miller of distorting the terms of the merger. Mr Bogdanchikov had stunned investors, saying Rosneft would retain full control over its assets even after they had been passed on to Gazprom. He also denied that he would become the head of a stand-alone Yuganskneftegas production unit.

The government would not give details of its new plan, but a spokesman for Gazprom said the two companies would be merged on the original terms, which implies full integration of Rosneft into Gazprom without Yuganskneftegas.

“Earlier this month we announced the framework of the merger. Now the government has approved a plan which will lead to this merger,” the spokesman said.

It was not clear last night what position if any Mr Bogdanchikov would have in a new company.

The merger is closely followed by international investors because it will remove a ring-fence mechanism that restricts foreign investors from buying Gazprom's domestic shares. The liberalisation of Gazprom's shares will make the company one of the most liquid stocks in emerging markets.

It was also unclear how Rosneft's debt would be distributed in the process of the merger.

According to people familiar with valuations prepared by Dresdner Kleinwort Wasserstein for Gazprom, a 10.7 per cent stake in the company is worth $9.2bn. However, the value of Rosneft is estimated at between $6bn and $7bn, including its $3.2bn of debt. According to these valuations Rosneft should be integrated into Gazprom on a debt-free basis to justify the share swap.

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