INTERVIEW: Antitrust, Schlumberger work on EDC deal structure

MOSCOW, Nov 22 (PRIME) -- The Federal Antimonopoly Service and U.S. Schlumberger are working on a mechanism to protect the company’s investment in Eurasia Drilling Company (EDC) and of economic interests of Russia in case of new Western sanctions, the service’s Deputy Director Andrei Tsyganov told PRIME in an interview released on Wednesday.

In July, EDC’s shareholders agreed to sell 51% in the company to Schlumberger, but the Federal Antimonopoly Service said that the deal was problematic due to the current political situation. Dmitry Peskov, spokesman for Russian President Vladimir Putin, said then that the acquisition has to be approved by a government commission for foreign investment control.

Tsyganov said that Schlumberger is yet to file a relevant request to the service as they need more time to think. “They know our position, we understand each other well. We are exchanging data and we are thinking about how to construct this in a better way. But neither we, nor the company can remove the political problem which does not depend on us. This is we have to make several important steps for the deal to take place, steps aimed at defining conditions when the deal is possible,” he said.

Two years ago the service and Schlumberger defined a list of conditions for approval of the deal, but the U.S. company took a pause. “I think that if our counteragents had been more persistent back then, everything would be good today,” he said.

Now there is one more condition to consider.

“We may find ourselves in a situation when projects and money invested in these projects may be frozen not just in Russia, but in other countries of the world as well just due to a political whim of certain foreign states. We have to work out additional mechanisms to avoid that, mechanisms which will protect Schlumberger’s investment in EDC on the one hand, and Russia’s economic interests on the other hand. We are discussing exactly that now,” he said.

But Schlumberger may buy less than 51% in EDC. Configuration of the deal depends only on the company.

“We would not in any way like to outline plans how they should implement the deal. It is obvious that the configuration of the deal will depend on how the deal is structured, on what conditions will be ultimately agreed upon by the company on one side and by the Russian state on the other side. No one is saying that they have to buy less than 51% now. If there is a will of the Russian authorities and the position of the company, it may happen,” he said.

He added that the request for the government’s commission for foreign investment control to study the deal is yet to be made.

BAYER-MONSANTO DEAL

Tsyganov said that the service has not received any signals from Germany’s Bayer or U.S. Monsanto that the companies will not fulfill the behavioral remedies on sharing technologies with Russian companies set by the service for their deal, or that the companies wish to leave the Russian market.

“We would like to contribute to Russia’s national security with this decision. You see dependence on foreign selection achievements is absolutely overwhelming on the Russian markets of agricultural cultures and of major cattle in many positions. It should not go on like this. It is obvious that the Russian selection science and technologies have to improve,” he said.

Bayer plans to close a U.S. $66 billion purchase of Monsanto February 2018. In early November, the service said that the deal may lead to domination of the merged company on all relevant Russian markets and to creation of high entry barriers for other companies.

“There is an objective disparity, other countries overcame us, and we think that if these companies want access to the Russian market, they have to share and to support development of the market. They should continue joint research that we have now. They should provide fair and non-discriminatory access to its achievements for Russian companies. No one is talking about expropriation of what Bayer and Monsanto have now. We are talking about commercial but fair relations between interested parties in selection and those who want to work on the Russian market,” he said.

“We’ve seen no signals that they are not ready for that, that they reject this, that they will not work on the Russian market anymore.”

MORE DEALS

The service is preparing about six to eight new deals for consideration by the government’s commission for foreign investment control, including deals in the transport and fish resources, but it is unclear when the commission may meet as it depends on a decision of its chairman Prime Minister Dmitry Medvedev, Tsyganov said.

“We have about six to eight deals in the pipeline, at their final stages,” he said.

The commission may study deals in the sphere of transport – ports and airports – and in timber and natural resources. “It is possible that the first deal in the history of the fish industry may be considered. Finally, we may have a foreign investor that submitted data to the government commission to buy a controlling stake in Russian companies that are engaged in water and biological resources. You know, we have had no such deal until now,” he said.

EXCHANGE TRADE

The service also plans to start pilot trade in mineral fertilizers on the St. Petersburg International Mercantile Exchange in December.

“Our ideas include launches of trade in mineral fertilizers on the St. Petersburg exchange in December, our road map is almost ready. We think that the winter period is convenient for that, because this is not a time when reserves are formed, but when additional reserves of mineral fertilizers for the next sowing campaign are created,” he said.

He added that farmers have almost formed their stock of fertilizers, which allows the service to forecast sales until the end of June 2018.

Initially only b-grade carbamide will be traded. “We expect the exchange trade to account for 7–10% sales of the fertilizer. Next, we suggest the launch of trade in a-grade carbamide,” he said, adding that the service is yet to define what types of fertilizers will be next.

The service may also launch exchange trade in milk, sunflower oil, and sugar in Russia in 2018.

“We are now discussing a rather vast range of agricultural products, starting from traditional grain and seeds and ending with dry milk and sunflower oil. Yes, it includes sugar, and it is a type of goods that we may sell on the exchange,” he said.

He added that some goods may appear in pilot trade in 2018.

“Both the Moscow Exchange and the St. Petersburg exchange have projects for that,” he said.

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