Problems Mount For BP Over Share Swap

BP is facing increasing pressure from investors to rethink its planned share swap with Rosneft, the state-controlled Russian energy company.

The Association of British Insurers (ABI), members of which control around 15 per cent of the UK stock market, is unhappy with the dilution impact of the share swap, according to a report from Sky News.

‘Investors and the ABI are also understood to be expressing concern about the corporate governance implications of bringing a Russian state-owned company onto BP’s share register in such a way,’ reports the broadcaster.

The ABI’s reservations have grown following the decision by a Swedish court this week to block BP’s planned joint venture with Rosneft to explore the Russian Arctic region, adds Sky News. 

The exploration deal was blocked following complaints from BP’s existing Russian partners in the TNK-BP joint venture.

BP plans to pursue the $16 bn share swap with Rosneft even though the exploration deal has been postponed, a decision that is being questioned by existing shareholders.

The swap would see Rosneft hold 5 per cent of BP’s ordinary voting shares, while BP would hold 9.5 per cent of Rosneft’s shares. Following the deal, the Russian government would become one of BP’s largest shareholders, as Rosneft is 75 per cent owned by the Russian state.

Yesterday Standard Life became the first big investor in BP to go public with its reservations about the share swap.

‘At the moment we don’t think BP has a Plan B so unless there is some clear commercial benefit to BP shareholders for doing the deal…. we’re not supportive at the moment,’ David Cumming, Standard Life’s head of UK equities, is reported to have told the BBC.

The Sky News report says fund manager M&G Investments has similar concerns to Standard Life.

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