Bashneft Conducts Reorganisation through Consolidation of Subsidiaries

OREANDA-NEWS. March 15, 2012. Joint Stock Oil Company Bashneft announces the launch of a reorganisation through a consolidation of its subsidiary companies: Ufa Refinery, Novoil (Novo-Ufa Refinery), Ufaneftekhim, Bashkirnefteproduct and Orenburgnefteproduct. Today, the Board of Directors of Bashneft and all of its subsidiaries conducted board meetings with the goal of discussing the proposed reorganisation.

In particular, the Board of Directors of Bashneft pre-approved the Consolidation Agreement for merging its subsidiaries into the Company and the conversion ratios which will be used to convert subsidiary shares into shares of Bashneft, subject to approval by the Company’s shareholders. The Board of Directors also agreed on the prices of ordinary and preferred Bashneft’s shares to be purchased at the request of the Company’s shareholders who decided to vote against the merger or did not vote.

"The aim of Bashneft’s transition to a single share is to increase the Company’s transparency, improve efficiency and corporate governance. The merger will be managed with utmost transparency and unconditional respect for the rights of all shareholders, allowing minority shareholders in Bashneft’s subsidiaries to become the holders of the more liquid Bashneft shares and benefit form the Company’s overall financial performance," said Alexander Goncharuk, Chairman of the Board of Directors of Bashneft.
The buyback prices were agreed on the basis of valuations carried out by an independent appraiser, Stremleniye, and were confirmed by international consulting firm Ernst & Young. The conversion ratios were calculated based on the buyback prices.

The Bashneft Board of Directors decided to call an in presentio Extraordinary General Shareholders Meeting on 27 April 2012 which will be convened to decide on the following agenda items:

Reorganisation of JSOC Bashneft by consolidating Bashkirnefteproduct, Ufaneftekhim, Orenburgnefteproduct, Ufa Refinery and Novoil into Bashneft and also approving the consolidation agreement;

A capital increase of JSOC Bashneft’s charter capital by issuing additional ordinary shares created through the conversion of ordinary shares in the consolidated subsidiaries;

A capital increase of JSOC Bashneft’s charter capital by issuing additional type A preferred shares created through the conversion of preferred shares in the consolidated subsidiaries.

The list of shareholders allowed to participate in Bashneft’s Extraordinary General Shareholders Meeting on 27 April 2012 will be compiled using the register of the Company’s shareholders as of 14 March 2012.

Today, 11 March 2012, the Boards of Directors of Ufa Refinery, Novoil, Ufaneftekhim, Bashkirnefteproduct and Orenburgnefteproduct agreed to hold in presentio extraordinary general shareholders meetings on 26 April 2012. The meetings will consider matters related to the consolidation of these companies into Bashneft. The Consolidation Agreement for merging these subsidiaries into Bashneft was also pre-approved.

The Boards of Directors of the above companies also agreed on the price of their respective companies’ ordinary and preferred shares to be purchased at the request of shareholders who voted against the merger or did not vote.

Proposed conversion ratios

Buyback prices approved by the Boards of Directors

Following the conversion of shares, the minority shareholders of the subsidiaries will become holders of the currently more liquid Bashneft’s shares. The reorganisation will enable them to benefit from the financial results of the entire Company rather than just a single subsidiary. Moreover, the minority shareholders of the subsidiaries, who voted against the merger or who did not vote will be able to sell their shares in the Bashneft’s subsidiaries for cash as part of the buyback process.

The integration of the Bashneft’s subsidiaries will optimise the Group’s structure, increasing the transparency of the Company’s activities, its quality of corporate governance and effectiveness of capital investments. Once the reorganisation has been completed, Bashneft will become a unified operational centre, which will take into account the specifics of all areas of the Company’s business activities: upstream, downstream and marketing.

If the proposed changes are approved by the shareholders of all companies involved and by all relevant regulatory authorities, it is expected that the reorganisation will be completed by the end of 2012.

Bashneft has retained the following consultants to assist in the reorganisation process: Ernst & Young, Goldman Sachs (Russia) (financial advisor) and Liniya Prava (legal advisor).