The Telegraph
Since 1st March, 1999
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Oil firm freezes Yukos merger

Moscow, Nov. 28 (Reuters): Russian oil firm Sibneft said it had suspended its merger with partner Yukos today, freezing a landmark $11 billion post-Soviet deal that has been dogged by pre-election political controversy.

The company’s announcement, which came without explanation shortly after the start of a joint shareholders’ meeting to elect board members to the newly merged company, stunned financial markets in Moscow and abroad, and sent Yukos and Sibneft shares tumbling.

Yukos shares were down seven per cent at $11.15. Sibneft shares were also down seven per cent at $2.27 after falling as much as 11 per cent earlier. “The completion of a merger between Yukos and Sibneft is suspended due to a mutual agreement reached between the core shareholders of both companies,” Sibneft said in a statement.

A spokesman for Yukos later said the statement was not issued jointly. Yukos chief executive Simon Kukes said it came as a surprise and told the shareholders meeting that management would continue working on the merger.

One of Yukos’ key shareholders, Leonid Nevzlin, who fled Russia to Israel fearing prosecution, also declined to comment.

Sibneft gave no further explanation for the suspension of the buyout, in which a 92 per cent stake in Sibneft has already passed to Yukos’ main shareholders in exchange for Yukos shares plus $3 billion in cash.

Yukos’ chief operating officer Stephen Theede said it it was unclear if Yukos could return the Sibneft shares it already holds and recover the cash it has paid for them. Both companies have said that under the terms of the merger, either party would have to pay a penalty fee of $1 billion to get out of the deal.

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