BP PLC and its billionaire Russian partners have reached a deal over TNK-BP that forces out its embattled CEO and signals an end to a bitter struggle for control of the Russian-British joint venture, officials said Thursday. Under the deal, CEO Robert Dudley, who has been running the company from abroad since leaving Russia in July, will step down by the end of the year. That has been a key demand of the Russian shareholder consortium AAR, which owns 50 percent of the venture. The consortium is comprised of Alfa Group's Mikhail Fridman and German Khan, Renova's Viktor Vekselberg and Access Group's Len Blavatnik. BP will nominate a new, independent CEO to replace Dudley, which must be approved by the TNK-BP board, according to both BP and AAR officials. The deal ends an acrimonious and very public fight that has battered Russia's image among investors. It has also contributed to a downgrade of BP's credit rating amid fears that the British oil giant would lose control of the venture, perhaps ceding part of its stake to a Russian state-controlled company. Under the deal, BP will keep its 50 percent stake in the venture, which supplies one-quarter of BP's oil and gas production. BP CEO Tony Hayward described the agreement as “a sensible means of resolving a situation that could not continue without causing serious damage to what has been an immensely successful joint venture for all concerned.” “I now look forward to a fruitful conclusion of negotiations so that we can rebuild trust with AAR and resume our record of success for the benefit of all parties,” Hayward said. “A transparent, responsible approach to governance will be a critical factor in the appeal of TNK-BP to potential future investors.” The announcement buoyed BP's stock, pushing its shares up by more than 3 percent in London within an hour of the news. Vekselberg, in an AAR statement, said the deal was reached after “very difficult negotiations.” “The main thing is that neither party allowed their emotions to overrule common sense during the conflict,” he said. The AAR statement also included comments from Deputy Prime Minister Igor Sechin, who has at times been involved in negotiations between the two parties, as well as presidential aide Arkady Dvorkovich, both of whom welcomed the deal. “This will send the right signal to the market,” Sechin said. Under the terms of the agreement, TNK-BP's board will be expanded to 11 directors, up from the current 10, and will include three independent directors, officials said. The management committee will be streamlined from 14 to just four executives. Additionally, shareholders have the option to offer up to a fifth of a subsidiary of TNK-BP through an international IPO “at an appropriate point in the future.” “I think it's a decent compromise,” said Roland Nash, head of research at Renaissance Capital. “They've gone some way to solving the issue over control and they have gone some way to finding a fair price.” Investors will be looking to see if the estranged partners can work together after relations between the two sides appeared to break down irreparably earlier this year when the dispute spilled out into the public. The Russian investors - who claimed Dudley was running the venture in the interests of BP, and preventing it from expanding abroad - challenged the number of foreigners eligible to work at the company. They also launched a personal attack on Dudley himself and alleged the company had underperformed its peers.
