By Chip Cummins in London and James T. Areddy in Shanghai
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 7, 2018).
Mining giant Glencore PLC and Qatar said they have scrapped plans to sell a roughly $9 billion stake in Russian state oil company PAO Rosneft to a once-high-flying Chinese firm now embroiled in investigations by Beijing.
In a statement late Friday, Glencore and Qatar said they were terminating an agreement, reached in September, to sell most of their roughly one-fifth stake in Rosneft to CEFC China Energy Co. The deal was intended to provide CEFC with just over 14% of Rosneft and would have strengthened energy ties between Moscow and Beijing.
The agreement with the Chinese buyer was the latest in a series of moves undertaken by Glencore, the state-owned Qatar Investment Authority and the Kremlin over the stake. In late 2016, as low oil prices pressured Russian finances, Moscow agreed to sell a 19.5% stake to Glencore and the Gulf emirate's investment fund for about $11.3 billion.
The exact terms of that complex deal were never straightforward. It gave Glencore an actual equity stake in Rosneft of only about 0.5%, and Qatar just under 5%. The rest of the deal was financed by Russian banks and Italy's Intesa SanpaoloSpA, which had planned to spread its risk by syndicating the loan to other banks.
The partners then struck a deal to unload their holdings with private energy-trading company CEFC, which appeared at the time to be a fast-growing investor with global ambitions and Beijing backing. CEFC, founded in 2002 and based in Shanghai, has been expanding internationally in recent years.
Earlier this year, though, whatever official support CEFC enjoyed appeared to be crumbling. In March, The Wall Street Journal reported Ye Jianming, the company's leader, was under investigation in China. Mr. Ye, who made his early fortune as an oil man, was seen to have close ties to China's military and intelligence.
Mr. Ye's whereabouts are unknown. Since his disappearance, banks have called in credit lines, and CEFC has sought to raise money in China. CEFC has been unable to complete some of its biggest plans, including a major expansion in the Czech Republic, the purchase of around 20% of New York financial-services firm Cowen Group Inc. and the purchase of a Portuguese insurer. CEFC couldn't immediately be reached.
All that put the fate of a sale of the Rosneft stake in doubt. Late Friday, Glencore said it and the Qatar fund had terminated their deal with CEFC and dissolved their own partnership agreement. Glencore said the two would subsequently each hold their respective equity stakes in Rosneft separately.
A subsidiary of the Qatar fund would take ownership of roughly 14% of Rosneft, giving the fund an overall 18.93% stake in Rosneft. Glencore, meanwhile, will exit with 0.57%. Exact financial terms between the partners and the banks involved weren't disclosed.
Glencore said it would receive 3.7 billion euros, or $4.43 billon, in the transaction. A person familiar with the matter said the cash would be used to pay back debt that helped finance the original deal. It was unclear whether Glencore Chief Executive Ivan Glasenberg would remain on Rosneft's board.
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Scott Patterson
in London contributed to this article.
Write to Chip Cummins at [email protected] and James T. Areddy at [email protected]