LUKoil Buys 1,300 U.S. Gas Stations

After a first attempt failed in 1997, LUKoil, Russia?s No. 1 oil firm, is trying to establish a foothold in the United States with a chain of 1,300 gas stations.

LUKoil has acquired East Coast-based retailing chain Getty Petroleum Marketing for $71 million in cash, the company said Thursday.

The deal, which is subject to customary regulatory approvals, marks the first time a U.S. public company has been acquired by a Russian corporation.

"This could be the first step in our planned expansion into the U.S. market," LUKoil deputy vice president Ralif Safi said in a statement.

Getty Petroleum operates 1,300 gas stations in 13 northeast and mid-Atlantic states that sell gasoline, diesel fuel, motor oil and lubricants.

LUKoil will buy out Getty Petroleum?s shares at $5 apiece, a 45 percent premium. At $71 million, the deal values each of Getty?s gas stations at about $55,000.

LUKoil is buying the U.S. company for "bargain-basement prices," the Aton brokerage said in a research note Friday.

"Getty?s shares are valued so cheaply that they no longer reflect the value of the company," said Steven Dashevsky, oil and gas analyst at Aton.

"LUKoil is buying into a very recognizable brand name that will give it a solid footing in the U.S.," he said. "It doesn?t get better than this. They?re getting an ongoing business right away."

A control squabble with its former U.S. partners led to the failure of LUKoil?s earlier bid to break into the American market, oil analysts said.

"It was a very messy affair," Dashevsky said.

Analysts expect the U.S. market to test LUKoil?s mettle and prove to be a hard sell.

LUKoil teamed up in 1997 with four U.S. supermarket groups through its 50 percent-owned affiliate Nexus Fuels of Irving, Texas.

But LUKoil could not resolve the ownership structure with its U.S. partners and after the 1998 ruble devaluation, the plans were abandoned.

Nexus has not operated over the past two years, Dashevsky said.

Konstantin Reznikov, oil and gas analyst at Alfa Bank, said the acquisition of Getty indicated that LUKoil had changed its strategy in the United States. In 1997, LUKoil was seeking to construct its own gas stations, but now the purchase of Getty Petroleum will enable it to operate an established network of stations.

Reznikov said that LUKoil will find the U.S. market a challenging environment to operate in and that the oil major is unlikely to yield impressive results from the acquisition since Getty has been posting lean profit margins.

"It must be some kind of public-relations action because it won?t be profitable," Reznikov said.

He added that the cheap oil that LUKoil would be able to supply Getty Petroleum would not meet the high quality standards of the United States.

LUKoil may find it necessary to begin cooperating with a U.S. refinery for the production of gas, the analyst said.

Getty?s headquarters will remain in Jerico, Long Island, LUKoil said.

LUKoil already operates gas stations in Ukraine, Belarus, Czech Republic, Romania and Bulgaria.