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Sistema to buy out Russian oil businesses

RUSSIAN services conglomerate Sistema has agreed to pay US$2.5 billion to buy majority control of six oil production, refining and marketing companies in the Bashkortostan region, Sistema said yesterday.

Sistema, which had already owned smaller stakes in the companies, has increased its shareholding to between 73 and 87 percent in the firms, which include a mid-sized oil producer, four refineries and a retail firm.

"This transaction will allow us to maximize the returns from our portfolio investments and to receive another steady source of cash flows," Leonid Melamed, Sistema's president and chief executive officer, said in a statement.

Sistema said it will make the payment in two lots ?? with US$2 billion to be paid upon the completion of the deal and US$500 million to be paid in 14 months after the deal is closed.

"The completion of the deal is contingent upon the fulfillment of a number of conditions," the statement said.

Sistema, which has said it would seek to buy total control in the assets, said it plans to make an offer to minority shareholders to buy out their shares.

The Bashkir energy firms include mid-sized oil producer Bashneft, refineries Novoil, Ufimsky, Ufaneftekhim amd Ufaorgsintez and retailer Bashkirnefteproduct.

The assets, previously controlled by the regional government, had been under lengthy legal investigation following the 2006 federal tax service suit accusing the companies' former owners of illegal dealing in shares. The proceedings were scrapped in February after the tax service withdrew its claim.


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