Jones Day counsels on a historic oil and gas joint venture in Russia
June 2003
On June 26, 2003 the British Prime Minister, Tony Blair and the President of the Russian Federation, Vladimir Putin were in attendance at the signing ceremony dedicated to the creation of TNK-BP, a landmark joint venture between the Russian oil producer TNK and British energy giant BP. This joint venture represents the largest single foreign investment in Russian history.
Jones Day served as transaction counsel to TNK and its shareholders throughout the negotiation of this extremely complex and groundbreaking transaction. Goldman Sachs and Alfa-Bank acted as financial advisors to TNK and its shareholders. BP was represented by Linklaters.
The joint venture involved the establishment of TNK-BP, a company owned 50-50 by TNK and BP, and the contribution by TNK's shareholders and BP of their respective oil and gas interests in Russia and Ukraine to TNK-BP valued over US$18 billion. BP will also pay US$2.4 billion in cash and US$3.75 billion in BP ordinary shares, issuable in three annual tranches. Upon completion of the transaction, which is expected later this summer, TNK-BP will become the third largest oil producer in Russia, and BP will become the second largest private sector producer in the world. BP’s acquisition of 50% of TNK marks the first time a major international energy company has acquired a strategic stake in a major Russian oil company and is expected have a profound positive impact on both the Russian oil and gas sector and the flow of direct foreign investment into Russia.
"This was the first major deal to bring together Jones Day and Gouldens lawyers to work as an integrated team on a landmark transaction. It demonstrated what can be accomplished by combining Jones Day global reach with Gouldens' quality English law expertise," said Vladimir Lechtman, the Jones Day M&A partner who lead the Jones Day team. "There is nothing like 24/7 drafting sessions, 18 hour conference calls with the other side and incredibly tight deadlines driven by strategic imperatives to test the quality of your team. It is clear from this experience that the Jones Day Gouldens transactional team could handle any deal."
Russell Carmedy, partner in charge of the London office, commented: "This groundbreaking transaction is a perfect example of the quality global service delivery that the merger between Jones Day and Gouldens was intended to create."
John Phillips, the partner who coordinated work on the deal in London, commented: "The TNK-BP deal shows we have the quality, expertise and depth in London to advise on the largest and most complex cross border M&A transactions."
Vladimir Lechtman who is responsible for coordinating Jones Day's practice in Russia and other FSU countries described the transaction as an important step towards implementing Jones Day's strategic objective of becoming an important player in cross-border energy transactions involving Russia.
The Jones Day team was led by Vladimir Lechtman (Washington). John Phillips coordinated the project in London. The transaction team also included Amanda Long, Oliver s'Jacob and Patrick Stafford in London and Jeff Schwartz in Washington. Ken Krupsky (Washington), and Blaise Marin-Curtoud (London) provided tax advice. Mila Gorbatova (London) advised on Russian law issues. Alain Checri (London) provided advice on securitization. Steve Guynn (New York) advised on U.S. securities law issues. Simon Chalkley (London) provided advice on IP matters. Steve Pearson (London) advised on dispute resolution provisions. Greg Olsen (London) and Tom Smith (Washington) advised the transaction team on EU and US competition issues. John Clark (London) assisted in negotiating the original MOU between TNK's shareholders and BP.