Gazprom Neft Makes Mandatory Share Purchase Offer to NIS Minority Shareholders

Gazprom Neft obtained approval to initiate the NIS share purchase procedure from the Republic of Serbia's Securities Commission on January 28, 2011.
The offer price is €4.8 per share. This valuation has been carried out in accordance with Serbian legislation and the terms of the agreement on the purchase and sale of 51 per cent of NIS shares, signed by the Government of Serbia and Gazprom Neft in 2009. Gazprom Neft acquired NIS shares at a similar price.
"In making an offer to purchase shares from NIS's minority shareholders, Gazprom Neft is meeting its obligations under its agreement with the Government of Serbia. Since NIS came under the management of Gazprom Neft, the Company has delivered improvements in terms of production and financial targets, making the company profitable and reviving investment in all areas across the business. Oil and gas production has risen for the first time in 20 years – over the past year it has increased by more than 30 per cent, and in 2010 processing volumes rose by 7.7 per cent. NIS plants have increased their eurodiesel output capacity by 25 per cent and are delivering approximately 50 per cent of Serbia's eurodiesel requirements. By 2020 NIS intends to achieveits strategic goals – firstly to double the amount of oil products it refines and sells, and secondly to treble the amount of oil and gas it produces. The Company will continue to work and develop in the best interest of all its shareholders," said Gazprom Neft Deputy CEO and Сhairman of the NIS Board Vadim Yakovlev.
NIS is Serbia's only vertically integrated oil company. It owns two oil refineries, in the cities of Pancevo and Novi Sad, with a combined annual capacity of 7.3 mln. tonnes, as well as a liquified gas production plant in Elemir. The company produces around 1.5 mln. tonnes of oil equivalent per annum, and operates in Serbia, Angola and Bosnia-Herzegovina. The company owns 480 filling stations and oil bases. NIS is Serbia's leading supplier of oil products. The company has 11,000 employees.
Gazprom Neft bought a 51 per cent stake in NIS in 2009, acquiring its shares from the Serbian government, which was the company's only shareholder. Gazprom Neft paid €400 mln. for its controlling stake. The agreement with the government also set out Gazprom Neft's obligations to invest at least €500 mln. in modernising NIS's businesses by 2012. This modernisation will bring the quality of its oil products into line with common European standards (Euro 5) and improve the environmental security of its production processes.
In 2009, Serbia's government decided to distribute a proportion of its NIS shares among Serbia's citizens, as a result of which the government now owns slightly less than 30 per cent of NIS shares. In 2010, the company was restructured from a closed joint-stock company into an open joint-stock company. As of 30 August, NIS shares are trading on the Belgrade stock exchange.
Under the agreement with the Serbian government, the price for the purchase of shares from minority shareholders was set at the highest of three parameters: it must not be lower than the average trading price on the stock exchange over the past three months; the price on the last day of trading preceding the publication of the "Declaration of Intent" to purchase shares; the price at which Gazprom Neft bought shares. Of these, the price which Gazprom Neft paid for NIS shares proved to be the highest. The "Declaration of Intent" to acquire shares was published on 13 January.
Once the offer period expires, bank transfers shall be made in Dinars into the accounts of the shareholders who have made their shares available for purchase, based on the exchange rate on the day, on which the transfer is made, but at an exchange rate no lower than the rate that was in effect on 13 January 2011. The value of each share will therefore amount to at least 506.48 Dinars.