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. Last Updated: 07/27/2016

LUKoil Sells Stake in the Izvestia Daily

LUKoil has sold a 38 percent stake in the Izvestia newspaper publishing house to the Mediainvest mutual fund for 24.8 million rubles ($826,000), parties to the deal said Wednesday.

The sale took place sometime this spring, but information on the deal only became public July 1, said Roman Shemendyuk, head of business development at Management-Center, which manages the Mediainvest fund.

As professional investors, the mutual fund is in a better position to monitor the stock's performance than LUKoil, whose energy sector expertise is worlds away in business terms from media management. For that reason, LUKoil was happy to transfer ownership responsibility to Mediainvest.

Shemendyuk said the fund would work to improve Izvestia's financial indicators, profits and transparency. "We are focused on carrying out the functions of a strategic investor," he said.

Until the stake can be sold to another investor for a profit, that is.

Shemendyuk expected companies would start offering to purchase the 38 percent stake now that the deal has become public. "If we find a buyer who offers a good price, we will consider it. But we are not actively looking," he said.

Despite shedding the Izvestia stake, a noncore asset, LUKoil's fundamental structure is unchanged, a source close to the deal said, adding that Management-Center is not connected with LUKoil -- not formally, in any case.

Mediainvest's shareholders have not been disclosed. The fund manager also holds 31 percent of a company called Russian Mediagroup and 76 percent of the Smena publishing house.

Shemendyuk denied suggestions published in Izvestia that Russian Mediagroup had been behind the sale.

Izvestia is owned by 300 private individuals and legal entities. Until recently, two major blocs of shares belonged to Vladimir Potanin's Interros group via his Prof-Media holding and 48 percent belonged to LUKoil via its LUKoil-Garant investment fund.

Subsequent to Mediainvest's purchase of the 38 percent stake, the value of those shares rocketed by a factor of 16 to 408 million rubles ($13.6 million), following their valuation by an independent auditor.

In March, LUKoil-Garant had offered to sell the shares to Prof-Media for $20 million, though Oleg Khodenkov, Prof-Media's first deputy general director who is also chairman of the Izvestia board of directors, said the talks had not gone far.

The $20 million price tag would have included a share of the Izvestia building on Pushkin Square, but the presidential property department challenged its privatization and the deal was called off.

Media sector analysts said that the sale was a sensible move by LUKoil.

"LUKoil has always been a strange investor," said Alexei Pankin, editor of Sreda magazine. "It always bought things without really understanding why it needed them, then it got rid of them. It's one of those oligarchic empires that always tries but never manages to use their media resources as a means of PR," he said.

"This is natural," Prof-Media's Khodenkov said. "Managing media resources has its peculiarities that are not integral to other parts of their business."