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. Last Updated: 07/27/2016

LUKoil, Fund Fail to Agree

Prosperity Capital Management met with LUKoil on Thursday over concerns about shareholders' rights in the oil giant's planned merger of production units, a director of the fund said.

LUKoil and the investment fund were unable to come to an agreement Thursday on the oil major's plans to merge the oil company Ritek with one of LUKoil's production units, fund director Ivan Mazalo said.

Prosperity, which manages $3 billion in Russia, is concerned that Ritek minority shareholders will suffer because of the deal's relative valuation of Ritek in comparison with LUKoil's Nazymgeodobycha unit.

Ritek, which is 64 percent owned by LUKoil, has a market capitalization of $1 billion, operates in the Urals and Volga regions and contributed about 2 percent to LUKoil's production last year, according to Alfa Bank.

Prosperity controls an estimated 13 percent of Ritek's shares and is seeking to boost its stake to 25 percent in order to block the merger plans at a shareholders' meeting in December. The fund is offering to pay minority shareholders $12 per share, 17 percent above $10.20, the level of Thursday's close.

LUKoil has called Prosperity's offer "unacceptable" and said that its merger plans would not violate the rights of minority shareholders.

MDM Bank said in a research note that LUKoil has a higher probability of getting its way and closing the merger.