EEMEA deal of the year: Gazprom $13.1 billion financing to acquire Sibneft

Euromoney does not like to select award winners simply because they have undertaken particularly big deals. However, the $13.1 billion package put together to finance Gazprom’s acquisition of its oil-producing compatriot Sibneft was certainly eye-catching.

Coordinating mandated lead arranger Dresdner Kleinwort Wasserstein and joint bookrunner ABN Amro devised the three-tranche deal to support Russian gas company Gazprom’s successful foray into the world of oil in late September.

The purchase of a 72.66% stake in Sibneft, Russia’s largest ever M&A deal, has finally put Gazprom on the road to becoming the integrated European oil and gas group that is its goal, after earlier government plans to merge it with newly acquired Rosneft fell through.

It was also the most visible sign last year of president Vladimir Putin’s avowed determination to exercise increased state control over the country’s strategic industries.

The deal was equivalent to the entire volume of syndicated lending to Russian corporates in the whole of 2004, and involved the largest ever non-OECD loan package. It also had to overcome any concerns about market liquidity, coming after an already sizeable $7.5 billion Rosneftegaz financing only a few months earlier.

“The fact that a company such as Gazprom can borrow a sum as large as $13.1 billion on an unsecured basis, with a maturity profile ranging from under one year to five years, indicates both how strong the Russian market and how strong the key Russian players, especially the state-owned ones, have become,” says Roland Boehm, managing director of global loan product at Dresdner Kleinwort Wasserstein.

Unsecured lending is still a relatively new phenomenon in the Russian syndicated loan market, and is the preserve of well-established names.

Because of the need for confidentiality in the run-up to Gazprom’s bid for Sibneft, only a core of Gazprom’s close relationship banks were approached in the early stages. Initial syndication of the $2.5 billion term loan facilities began on October 18, with one-stop syndication across two ticket levels. Tickets, tenor, pricing and timing were designed to differentiate the deal as much as possible from competing deals in the market.

The $5.6 billion Loan A facility (see table below) is due to be refinanced in the bond markets later this year, so spreading Gazprom risk among a larger pool of investors. “The charm of the structure that was chosen is that it does not significantly reduce appetite for Gazprom’s name,” Boehm says.

The relative ease with which such a large financing package was put together should bring benefits for other companies on the acquisition trail. “The financing package has shown that for top companies, acquisition finance is available in very large amounts,” says Boehm. “This is something that has changed both the Russian market and the wider EEMEA market.”

Dresdner also joined Citigroup as joint adviser to Gazprom on the Sibneft acquisition. Sibneft is Russia’s fifth-largest oil company by reserves, and its sixth-largest refiner. It also owns a 49.7% strategic interest in Russian oil company Slavneft. The sale of Sibneft to its state-owned rival also enabled its majority owner, Roman Abramovich, to move more of his assets abroad.

Aside from the massive acquisition financing package, Gazprom developed its investor base in euros last year, with two €1 billion deals.