In late May 2009, Sibir Energy company, which is listed on the London Stock Exchange has agreed to accept a takeover bid from Gazprom Neft. According to the terms of the transaction, Sibir Energy is valued at USD 3 billion.

Gazprom, which is the 5th largest Russian producer of oil, made a cash tender offer for Sibir Energy stock, with the exception of 40 percent of the shares owned by Bennfield Ltd., fuel company Central, and the Bank of Moscow.

In April, Gazprom Neft increased its ownership of Sibir’s stock to 27.5 percent. Gazprom has agreed to pay 500 pence for each share of Sibir, more than three times the value the company’s stock had when it was publically traded in February. Following the acquisition, Gazprom Neft would be able to obtain a controlling interest in Sibir Energy. 

According to British law, a shareholder having more than 30 percent ownership of the target company’s stock must advance a takeover bid.

Sibir Energy, a medium-size producer of oil in Russia’s Siberia region is controlled by Igor Kesayev and Shalva Chigirinsky, who share 47 percent of the company’s stock evenly. Russian media agencies have already reported Mr. Kesayev’s decision to sell his shares to Gazprom.

Sibir Energy runs the Moscow Refinery with Gazprom Neft. It also has a joint venture project for oil production in Siberia with Royal Dutch Shell. Sibir Energy is currently involved in a legal dispute with Shalva Chigirinsky to return funds he got as part of a failed and controversial deal to sell his real estate portfolio to the company.

The real estate transactions and stock manipulation created a substantial debt for the company. The trading of Sibir Energy’s shares was suspended in February of 2009, as the price per share dropped to 175 pence from a high of 814 pence in the summer of 2008.

Industry experts think that Gazprom Neft is tightening its grip on Sibir that has attractive upstream assets in Russia.

Alexey Kokin, gas analyst with Metropol brokerage, thinks that it is nearly inevitable that Gazprom will buy Chigirinsky and Kesayev out, to increase their ownership to 80 percent. Sibir’s Salym oilfield is considered to be one of the most attractive places for extraction in Western Siberia.

If the deal is successful, Gazprom Neft would become one step closer to Russia’s 4th largest oil production company Surgutneftegaz.

Surgutneftegaz extracted 62 million tons of crude oil in 2008. Gazprom Neft’s production stood at 40 million tons. This year, the company set a target of 45 million tons. Sibir Energy’s production is estimated at 6 million tons for the current year.

After acquiring a greater share of ownership of the Moscow refinery, Gazprom Neft will be able to expand its refining operations considerably.

Even though the price of Sibir’s shares was more than half of what Gazprom Neft now offers, the company’s shareholders would still consider the offer attractive in light of the recent corporate scandals that plagued the company.