2 Oligarchs in $7 Billion Deal for a German Oil Company
By STANLEY REED
LONDON — The German utility RWE said on Sunday that it had reached a preliminary agreement to sell its oil and natural gas subsidiary, RWE Dea, to the Russian billionaires Mikhail Fridman and German Khan for 5.1 billion euros, or roughly $7 billion.
The RWE Dea acquisition is the first known oil and gas transaction by the LetterOne Group, the investment vehicle Mr. Fridman and Mr. Khan set up in 2013 to invest the estimated $14 billion they received for selling their shares of TNK-BP, the Russian oil affiliate of the oil giant BP.
The latest transaction brings the Russian investors a small oil company based in Hamburg, Germany, that could be a useful platform on which to build a wider empire. In Sunday’s statement RWE said that the Russian investment group intended to make the German unit “the principal conduit of the group’s investments in the oil and gas industry.”
The energy investments, someone close to the company said last year, would be part of a broader effort to diversify the Alfa Group, which Mr. Fridman heads, outside Russia. Such diversification makes sense for the Russian oligarchs, particularly at a time when the Russian business environment is unsettled by a confrontation with the West over Ukraine.
Still, with worries that Russian natural gas exports to Europe, and particularly Germany, might be cut off, the timing of this sale of German energy assets to Russian investors seemed unusual.
LetterOne declined to comment, other than to confirm the deal.
The group, which is based in London, hired prominent advisers including John Browne, the former chief executive of BP, and Andrew Gould, the former chief executive of Schlumberger, and have been scouting for deals.
Mr. Fridman is one of Russia’s wealthiest businessmen and heads the Alfa Group, which has investments in banking and telecommunications. Mr. Khan is his longtime business partner.
The two men, along with other Russian partners, sold a 50 percent stake in a Russian oil company then known as TNK in 2003 to BP. While the investment proved lucrative for all parties, it was marred by infighting and litigation.
RWE has been trying for about a year to sell its oil and gas subsidiary in order to reduce debt and focus on its core power business, which is struggling because of Germany’s decision to exit nuclear power and competition from renewable energy sources.
This month, the company reported a €2.8 billion loss for 2013, mainly because of write-offs on power plants. “This agreement is a major milestone in delivering our announced strategic realignment of the group,” RWE’s chief executive, Peter Terium, said in a statement.
The deal brings the Russian investors a small oil company with production or stakes in locations including Germany, Norway, the British North Sea, Denmark and Egypt.
The subsidiary has about 1,300 employees. In 2012, it had net income of €525 million on revenue of about €2 billion, according to its website.
A version of this article appears in print on 03/17/2014, on page B7 of the NewYork edition with the headline: 2 Oligarchs in $7 Billion Deal for a German Oil Company.