Abramovich pulls out of $11bn merger with Yukos

Roman Abramovich, the Russian tycoon who bought Chelsea Football Club, yesterday dramatically called a halt to the $11bn (£6.4bn) takeover of his oil company in Russia.

The merger of Mr Abramovich's Sibneft with Yukos, to form Russia's leading oil company, worth $45bn, was all but complete. An extraordinary general meeting in Moscow yesterday, to tie up the final details of the deal, was left in disarray after the Sibneft side declared it was pulling out.

The companies announced the merger in April but in October the high-profile chief executive of Yukos, Mikhail Khodorkovsky, was arrested on charges of fraud and tax evasion. He remains in jail.

Analysts believe Mr Abramovich's decision to cut ties with Yukos is an attempt to insulate himself from an apparently politically motivated campaign by the Kremlin against Mr Khodorkovsky and Yukos. Stephen O'Sullivan, the head of research for United Financial Group, a Moscow brokerage, said: "Yukos looks as if it has been left standing at the altar but it is unclear how Sibneft can pull out at this stage ... Abramovich must be pretty convinced he can do it."

Sibneft, majority owned by Mr Abramovich, has already collected $3bn in cash and $8bn in Yukos shares from the deal. That gave it a 26 per cent stake in the enlarged company. To break the deal, Mr Abramovich would not only have to return the cash and shares, but also face a $1bn break fee.

Analysts believe that the Sibneft move is either an attempt to pressure Yukos into giving it better merger terms or a strategy that would see Sibneft separated so it could be sold to a foreign company. Exxon, the US giant, showed interest in acquiring a large stake in the Yukos-Sibneft combination, before Mr Khodorkovsky was arrested.

Exxon or other international energy companies might be prepared to buy a standalone Sibneft.

Industry sources said that Mr Abramovich, who bought Chelsea in the summer, does not already have a deal lined up with Exxon.

The merged Yukos-Sibneft company was so big that only a company the size of Exxon could have considered it a target. Sibneft on its own could attract a bigger range of potential buyers.