Yukos to Sell Refinery to Poland's Orlen for $1.4 Bln (Update2)

OAO Yukos Oil Co., once Russia's biggest oil producer, will sell its 53.7 percent stake in a Lithuanian refinery to Poland's PKN Orlen SA for $1.43 billion tomorrow, a Yukos spokeswoman said in an interview. An agreement completing the sale of AB Mazeikiu Nafta to Orlen, Poland's largest refiner, will be signed in the Netherlands, Yukos spokeswoman Claire Davidson said. The deal, which still requires approval by Lithuanian regulators, will keep the only refinery in the Baltic states out of Russian control. Yukos won approval for the sale after U.S. Bankruptcy Judge Robert Drain today lifted an order blocking it, over objections by Yukos receiver Eduard Rebgun, who said creditors might not get any proceeds. Drain said the risk of losing the sale outweighed those concerns. The approval was granted a day before a deadline that would have allowed Orlen to scrap the deal. ``It is clear to me that there has been a lengthy and professionally run sale process of an asset that, while extremely valuable, is difficult to sell,'' Drain said at a hearing in New York. Moscow-based Yukos is selling the refinery stake to raise money for creditors owed $22 billion. Rebgun, who was appointed by the court overseeing the Yukos bankruptcy in Russia, filed a petition with the U.S. court in April to block the sale without his consent. `Fair Sale Price' ``The judge listened very carefully to both sides and considered Mr. Rebgun's legitimate concerns about the sale, but in the end decided the risk of losing the sale was too great,'' Howard Seife, Rebgun's lawyer, said. The two sides will work on an agreement to place the proceeds with a Dutch court for distribution to creditors, he said. Rebgun revealed Orlen was the proposed buyer in testimony today. He told Drain the company offered to buy Yukos's 53.7 percent Mazeikiu stake and a 40.7 percent share held by Lithuania's government. Polish newspaper Gazeta Wyborcza reported the total bid was more than $2.5 billion. Yukos ``obtained a fair sale price'' for the Mazeikiu stake, Davidson said in an e-mail. ``The risk of not going forward to sign a sale to the nominated purchaser far outweighed any concerns raised'' by Yukos's receiver. ``We are very pleased by this decision, which opens the way to finalizing the transaction,'' PKN Orlen spokesman Dawid Piekarz said by telephone. Orlen shares rose 1 percent to 53 zloty by the 4:30 p.m. close of trading in Warsaw. Another Bidder ``The Lithuanian government applauds the decision,'' said Saulius Specius, an adviser to Prime Minister Algirdas Brazauskas who is overseeing the sale of Mazeikiu Nafta. Nemira Pumprickaite, the prime minister's spokeswoman, said PKN Orlen was viewed by the government as the ``most acceptable buyer.'' Zach Clement, a lawyer for Yukos, earlier today asked Drain to lift the order requiring Rebgun's consent, saying, ``We are truly risking losing the sale.'' Clement accused the receiver of ``manufacturing excuses'' to withhold his approval. Rebgun said another bidder, which he wouldn't identify, offered a higher price for the Yukos stake. Kazakhstan's state oil company, KazMunaiGaz, said this week it would make a bid. Rebgun called the sale agreement with PKN Orlen ``incomplete'' in testimony today. ``I think the company should have a better understanding of what it will get,'' Rebgun told Drain. ``It would be an unwise decision to approve the sale right now.'' `Fend Off Competition' Orlen wants to buy Mazeikiu because the Lithuanian company could hurt its position in the Polish fuel market if rivals like Kazakhstan's KazMunaiGaz or Russia's OAO Rosneft acquire it, analysts said, including Maciej Wewiorski of Warsaw's CDM Pekao Securities. Mazeikiu's new owner will work to increase its refining capacity and needs to find new markets for its fuels. ``Orlen needs to buy Mazeikiu to fend off competition,'' Wewiorski said in a phone interview. Mazeikiu would increase its market in Poland if it were controlled by companies such as KazMunaiGaz and Rosneft. For Orlen, buying Mazeikiu ``is positive in the long term.'' Lithuania had said it might nationalize Mazeikiu, which accounts for a fifth of its economy, if Russia's campaign against Yukos delayed a sale. U.S. and European politicians have raised concerns that Russian President Vladimir Putin may use the European Union's dependence on Russian oil and gas as a political weapon. Sold Control Mazeikiu was crippled in the 1990s by interruptions to its supply of crude oil after Lithuania sold control to Williams Cos. of the U.S., rejecting an offer from Moscow-based OAO Lukoil. Based in the town of Juodeikiai, Mazeikiu was built as the western hub of the Soviet oil system in 1980. It includes the only refinery in the three Baltic States, along with a crude-oil terminal and a pipeline. Yukos is on the brink of liquidation after the Russian government said it owed more than $28 billion in back taxes. A Moscow court appointed Rebgun as receiver after banks including Societe Generale SA and Citigroup Inc. filed a bankruptcy petition in March to recover $481 million. The case is pending. The U.S. case is In re: Yukos Oil Co., 06-10775, U.S. Bankruptcy Court, Southern District of New York. Source:Bloomberg.com