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July 28, 2010 6:31 PM

Wachtell, Akin Gump Advise on $3.4B ConocoPhillips/Lukoil Split

Posted by Brian Baxter

The third-largest integrated oil and gas company in the U.S. has said it will sell its 20 percent stake in Lukoil as part of a previous plan to divest its ownership in the Russian energy giant. The first stage of the agreement calls for Lukoil to pay $3.4 billion to Houston-based ConocoPhillips to buy back 7.6 percent of its shares.

ConocoPhillips announced the agreement with the release of its second-quarter earnings report, which saw the company's profits surge. A company spokeswoman tells The Am Law Daily that ConocoPhillips was advised by Wachtell, Lipton, Rosen & Katz on the sale of its Lukoil stake. An SEC filing on Wednesday reveals that corporate partner Andrew Brownstein is leading the firm's team on the deal.

Brownstein, who did not respond to a request for comment, previously advised the Phillips Petroleum Company on its 2002 merger with Conoco to create ConocoPhillips. He then advised ConocoPhillips on its $1.98 billion purchase of an initial 7.6 percent stake in Lukoil in September 2004, as well as its subsequent $35.6 billion acquisition of oil and gas producer Burlington Resources in December 2005. (ConocoPhillips's general counsel, Janet Langford Kelly, is a former Wachtell associate who joined the company in 2006.)

ConocoPhillips has struggled in recent years. As reported by the Houston Chronicle, the company downsized  its workforce by 4 percent in 2009 and wrote down the value of a stake in Lukoil that had grown to 20 percent. In recent months, ConocoPhillips has sought to sell off $10 billion in assets and streamline its business portfolio to raise capital.

The company turned to Cleary Gottlieb Steen & Hamilton in August 2008 when it sold off 600 gas stations for $800 million (a grassroots campaign saved many of the iconic "76" balls atop stations operating under its Union 76 brand). Canada's Osler, Hoskin & Harcourt advised ConocoPhillips earlier this year on the sale of a 9 percent stake in a Canadian oil sands joint venture.

Under the terms of the deal announced Thursday, Lukoil will buy back 7.6 percent of its own shares for $3.44 billion, while holding an option to buy another 11.6 percent by September 26.

Three partners from the Moscow office of Akin Gump Strauss Hauer & Feld advised Lukoil on the deal: international transactions partners Natalia Baratiants, corporate and securities partner Alexander Danilov, and cross-border M&A partner and Moscow managing partner Richard Wilkie. Rick Burdick, an international transactions partner in Akin Gump's Washington, D.C., office, also worked on the deal.

Wilkie led a team from the firm advising Lukoil in September 2004 when it formed its strategic alliance with ConocoPhillips. Baratiants advised Lukoil when it became the first Russian company to list its shares on the London Stock Exchange in July 2002. Burdick, who was named an Am Law Daily Dealmaker of the Week earlier this year for braving "Snowmageddon" to advise FirstEnergy on its first-ever M&A deal, was not immediately available for comment.

Lukoil said in a statement that it expects to complete its share purchase by August 16. ConocoPhillips, which has already sold close to $400 million in Lukoil stock, plans to sell the rest of its investment in Lukoil by the end of the year.

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