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Russian Oil Giant Yukos in Large Takeover

April 22, 2003

MOSCOW (AP) _ Russia’s largest oil company, Yukos, announced Tuesday that it would acquire another top domestic oil company, Sibneft, in an agreed takeover that would create one of the world’s biggest oil concerns.

Yukos will pay $3 billion in cash for an initial 20 percent stake in Sibneft. Yukos agreed later to acquire the rest of Sibneft, which is currently Russia’s No. 5 oil company, both companies said in a statement.

Yukos’ chief executive and largest shareholder, Mikhail Khodorkovsky, will be chief executive of the new company, while Sibneft President Eugene Shvidler will become chairman, the statement said.

The combined group will be named YukosSibneft Oil Company, the statement said. YukosSibneft said the new company would be the fourth-largest private oil producer in the world. The new company will have total reserves of around 19.4 billion barrels of oil and gas equivalent.

Daily crude oil production is approximately 2.3 million barrels, including Sibneft’s share in another Russian oil company, Slavneft.

``By combining with Sibneft, we’ll maximize our competitive advantages thanks to the synergy gained by uniting excellent management teams, highly professional labor forces and the profitable industrial assets of the two companies,″ Khodorkovsky said.

``The new industrial giant with its huge industrial and financial potential will reach even higher business efficiencies, moving closing to our strategic goal of becoming a leader of the global energy market,″ Khodorkovsky added.

Shvidler said the new company would be ``a superb alliance of progressive and like-minded companies with complementary strategic and management strengths which effectively creates a new supermajor that will enhance value to its shareholders and better serve its millions of customers.″

According to the statement, the co-shareholders of Sibneft will subsequently exchange their remaining shares in Sibneft at a ratio of 0.36 of YukosSibneft for each 1 percent share in Sibneft. YukosSibneft will make a fair offer to the minority shareholders of Sibneft, the statement said.

After receiving a fairness opinion from an internationally recognized investment bank, prior to completing the transaction, Yukos plans to increase its leverage and is considering cash distributions to its shareholders in the form of dividends and share buybacks among other options, the statement said.

The merger is to completed by the end of 2003, subject to the approval of shareholders and all requisite regulatory consent.

The combined entity is expected to include six principal refineries in Russia, another one in the former Soviet republic of Lithuania, and several other refining facilities in Russia and in Belarus that are currently linked to Slavneft. These facilities refined a total of 57.7 million tons (421.8 million barrels) in 2002.

The combined group also would have more than 2,500 filling stations, by far the largest chain in Russia.

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