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. Last Updated: 07/27/2016

Surgut Shares Jump 5% Despite Takeover Denial

In a recent meeting with analysts from the Aton brokerage, reclusive Surgutneftegaz chief Vladimir Bogdanov dismissed rumors that a big investor had launched a hostile takeover bid, Aton said Tuesday.

A Surgut official confirmed that Aton had met with Bogdanov, but declined further comment.

Surgut's shares have risen more than 15 percent during the past week and closed up another 5 percent Tuesday to 35.2 cents amid rumors that a hostile bidder was buying its freely floated shares and pushing for legal changes to cancel the company's treasury stock.

If the treasury stock is cancelled, a relatively small free float could then turn into an important stake in the firm.

"Bogdanov dismissed talk of a strategic investor buying a stake as 'rumors,' citing small volumes and undisclosed arrangements that prevent any hostile investor from taking control of treasury shares," Aton said.

"When asked whether a strategic buyer could get control of treasury shares by acquiring all other shares outstanding, Bogdanov said 'no' in a rather categorical manner," said Aton, adding that the Surgut executive declined to elaborate.

Surgut has irked investors for years by paying dividends that analysts and investors say are below fair levels and by allowing management to vote stock held by Surgut's subsidiaries.

The management is believed to control about 70 percent of all the firm's stock, including a 40 percent treasury stake held by a fully owned subsidiary.

Market players say that Surgutneftegaz's rivals may be lobbying to close a legal loophole that allows a company's management to vote on behalf of stock held by a subsidiary, even though current legislation forbids voting on stock held by the company itself.

Analysts have said that if Surgut's treasury shares were excluded from calculations, the firm, whose current market capitalization stands at $12.2 billion, would become one of Russia's cheapest oil majors and a perfect acquisition target.