A return to deal-making and expansion by commodities trader and miner Glencore PLC (LON:GLEN) via the joint purchase of a fifth of Russian state-controlled oil group, Rosneft, pleased investors today.
Glencore and Qatar’s sovereign wealth fund - the FTSE 100-listed group’s largest shareholder - will pay around €10bln (£8.5bn) for a 19.5 per cent stake in Rosneft.
With fellow UK blue chip oil giant BP PLC (LON:BP.) already controlling a near-20% stake in the Russian firm – which is currently impacted by Western sanctions - the move will reduce the Russian state’s holding in Rosneft to 50%.
READ: Glencore still "compelling value"
Helped by the news, Glencore shares were up 3%, or 9.4p to 306.1p in early afternoon trading.
Glencore has spent the past year cutting billions in debt through the sale of assets to help allay investors’ concerns over its commodities exposure.. The deal suggests the lure of taking a share in one of the world's biggest oil companies outweighs the risks that come with Western sanctions imposed on Russia over the conflict in Ukraine.
The Switzerland-based firm has been close to Rosneft for some time, having advanced it $10bln in a long-term supply deal in 2013.
Glencore said in a statement today that the deal "will be conditional on the subsequent finalisation of all relevant financing, guarantee and other agreements" and could be closed in mid-December.
Oil price driven
The deal comes a week after Russia and oil cartel OPEC agreed to coordinated output cuts to support oil prices, the first time they have reduced production in tandem in 15 years.
Oil prices have risen back above $50 a barrel in the wake of the production-cutting deal, easing some of the pressure on the Russian economy which has slumped into recession over the past two years as crude prices have fallen sharply on global oversupply issues.
The sale of the Rosneft stake was announced yesterday evening by Russian President Vladimir Putin and Rosneft's chief Igor Sechin.
Mr Putin said that Russia had achieved a good price for the stake because it was selling as oil prices were on an upward trajectory.
The deal suggests the lure of taking a share in one of the world's biggest oil companies outweighs the risks that come with Western sanctions imposed on Russia over the conflict in Ukraine.