The sale of Eurasia Drilling raised questions from the FAS

Problems arose during a large and unexpected transaction for the sale of 45.65% in the Russian oil services company Eurasia Drilling to the American Schlumberger, announced three weeks ago. The FAS, which has already sent a corresponding request, wants to carefully study it. Eurasia Drilling itself believed that approval of the service would not be required. Kommersant's sources call the threat of a complete breakdown of the deal real.

Yesterday it became known that on January 28, the Federal Antimonopoly Service sent Schlumberger a request for a transaction for the company to purchase 45.65% of Eurasia Drilling Company (EDC, one of the largest oil service companies in Russia) and expects to receive a response by the end of the week. The service became interested in the deal after learning about it from the media. The FAS explains that “from the available information it is not clear” whether the American company should approve the deal, so the agency wants to obtain additional information. Schlumberger and EDC do not comment on the situation. Announcing on January 20 a deal worth $1.7 billion ($22 per GDR, at that time the premium to the market was 80%), the parties assured that no approval was required. EDC shareholders, including CEO Alexander Japaridze (30.2%) and Alexander Putilov (22.4%) must approve the deal on February 16, and it is planned to close in the first quarter. Schlumberger also receives an option to purchase the remaining shares of EDC for a period of five years.

Industry participants expected questions about the deal. According to Kommersant's sources, "one of the major players" is dissatisfied with the strengthening of the American position in the Russian market. One of Kommersant’s interlocutors is sure that this is why the FAS was interested in the deal. The government official admits that for now the FAS request is a “formality” and “most likely” the first deal to purchase a 46% stake does not really need approval, since Schlumberger does not gain control of EDC. “But there is an understanding that in any case an instruction may be given not to approve the deal for reasons of principle,” he clarifies.

Managing partner of the law firm Alliance / Tessitore, Kuznetsov and Petrova, Oleg Kuznetsov, notes that since 2011, Russian antimonopoly legislation “has become less linear and has a cross-cutting nature.” In particular, it takes into account not only the circle of persons and the size of the package participating in the transaction, but also its impact on the commodity markets of the Russian Federation. In this case, he says, since the transaction affects large assets in the country, the FAS in any case has the right to check it and the need for approval may be considered justified. Lawyer Svyatoslav Pats adds that preliminary approval of the FAS is also required for transactions that make it possible to determine the conditions for a foreign legal entity to carry out business activities or to exercise the functions of its executive body. Schlumberger, even at the first stage of the transaction, will become the largest shareholder of EDC, the lawyer adds. According to Alexander Nazarov from Gazprombank, there is a high probability that only the first part of the deal will be implemented, but its complete cancellation is also possible.

Olga Mordyushenko, Kirill Melnikov, Yuri Barsukov

Additional drilling – Kommersant