British and Russian TNK-BP shareholders share peace pipe

British and Russian TNK-BP shareholders and the Alfa-Access-Renova (AAR) consortium have signed a memorandum of understanding regulating the resolution of their six-month conflict.

The price of peace is the resignation of Robert Dudley, the appointment of a new company head, changing the board structure and a likely IPO by one of the TNK-BP subsidiaries. The company's top managers, Russian officials, and the stock market took the news gracefully - TNK-BP stock immediately shot up. However, analysts are certain that a new power-sharing arrangement is only the first stage in the corporate warfare to be followed by property division.

Dudley is to quit before the end of the year, to be replaced by a new and independent CEO. BP intends to offer its own candidate with a knowledge of Russian and considerable business background in Russia. The board of directors is expected to approve him unanimously.

That, however, is not the only loss to be suffered by the company. In the wake of the memorandum, TNK-BP executive director German Khan (Alfa co-owner) and Victor Vekselberg (Renova owner) may leave their posts, said BP executive director Tony Hayward.

Deputy Prime Minister Igor Sechin is also pleased: "Negotiators have come to an agreement at the shareholder level without involving third parties, including the state. They gave the right signal to the market." And the market was not slow to respond. On the heels of the news, TNK-BP stock rocketed up by 19%.

The subject of corporate conflict is not yet closed, believes Konstantin Simonov, general director of Russia's National Energy Security Foundation: "The issue concerned not the stepping down by Robert Dudley or Victor Vekselberg, but the company's future." In his view, the conflict will end in changing the company's ownership structure, an assault of state capital, and the creation of a majority owner."

Capital brokerage analyst Vitaly Kryukov said that a great deal would depend on the new names tipped for company head and board members, particularly their independent status. "Otherwise, the conflict will soldier on, and the arrangement adopted yesterday will collapse like a house of cards," he said.

Experts have been hard put to name a successor for Dudley that is competent enough to meet the qualifying requirements. Simonov is of the view that Anglo-Saxon companies do not breed these kind of people, who are found only in German companies.

Source: RBC Daily (What the Russian papers say, RIA Novosti) - September 05, 2008