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BERLIN/FRANKFURT: BASF investors said that oil and gas business Wintershall Dea’s exit from Russia, though painful, clears the way for plans to take it public and for BASF to focus on its chemicals operations.

BASF late Tuesday flagged a 7.3 billion euro ($7.9 billion) writedown on Wintershall Dea (WD), as the energy business, in which Russian billionaire Mikhail Fridman’s investment firm LetterOne owns a 27% stake, pulls out of Russia.

Portfolio manager Arne Rautenberg of mutual fund company Union Investment, among the 10 largest BASF shareholders, welcomed BASF drawing a line.

“No-one in the market has ascribed any more value to the Russian activities,” Rautenberg told Reuters, adding that the remainder of WD had been boosted by high oil and gas prices.

“The way to an IPO, which has long been in the making, has now been paved,” he added.

It took the company much longer than other oil companies to face up to the loss of its Russian operations, with Wintershall Dea CEO Mario Mehren saying last year that the company could not just allow assets to fall into the hands of the Russian state.

BASF had explored selling the assets to joint-venture partner LetterOne, a person familiar with the matter told Reuters in May, but LetterOne quickly ruled itself out as buyer.

Oil majors like BP or TotalEnergies are flush with cash after Russia’s attack on Ukraine inflated global energy prices, even after taking billions of dollars in impairments in their Russian operations.

Markus Mayer, an analyst at brokerage Baader Helvea, estimates that BASF’s stake in WD is worth between 6 and 8 billion euros.

BASF said its IPO plans for WD, though ruled out for now given the war in Ukraine, would still be pursued over the longer term.

“This step will facilitate an IPO of Wintershall Dea,” said Cornelia Zimmermann, a corporate governance specialist at mutual fund group Deka Investment.

“As painful as the write-downs are, they do create a better outlook for the further development of the group,” she said, adding that BASF was avoiding further legal risk and reputational damage.

That was reflected in the market reaction to the news, with the shares bouncing back from initial losses of as much as 2.2% on Wednesday to close the trading session 0.6% higher.

BASF said last year that the oil and gas company’s exposure in Russia was the reason for it to hold off on plans to take Wintershall Dea public.

Before that, LetterOne had voiced opposition to the initial public offering, causing a public rift with its German partner a year ago.

Before the Ukraine war, Russia had accounted for roughly half of WD’s global oil and gas output. Its other regions for production and exploration are Northern Europe, North Africa, the Middle East and Latin America.

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