UPDATE 2-Rosneft finalises deal to buy TNK-BP stake from AAR

* Tycoons to get $28 bln in cash on completion

* BP agreed $27 billion cash and stock deal earlier

* Rosneft must integrate two major producers

* Exxon man to become head of upstream at Rosneft

By Vladimir Soldatkin

MOSCOW, Dec 12 (Reuters) - Rosneft has finalised a deal to buy half of TNK-BP for $28 billion, clearing the way for a full takeover that would make the state-controlled Russian oil major the world's largest listed oil firm by output.

A quartet of billionaire tycoons will receive cash on completion of the deal, which was signed on Wednesday and should win a green light from Russian and European regulators in the first half of 2013.

The AAR consortium, representing Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, will exit the business, finally putting an end to any speculation that they might have won an equity interest in Rosneft via the deal.

British oil major BP, which entered a lucrative but rocky partnership with the tycoons in 2003, has already signed a binding agreement to sell its one-half stake in TNK-BP to Rosneft for $27 billion in cash and Rosneft stock.

"As we work towards closing this transaction, I am confident that this deal benefits all stakeholders and is ultimately good for the future of the entire Russian oil and gas industry," Fridman said in a statement.

The deal will hand Rosneft control over 40 percent of oil output in Russia, the world's top oil producer, while BP will finally get to team up with the Kremlin after years of trying to escape its dysfunctional partnership with the oligarchs.

The deal was announced during a speech to parliament by President Vladimir Putin, who vowed to fight capital flight, running at $80 billion per year, and use of offshore tax havens.

TNK-BP is owned by an investment vehicle registered in the British Virgin Islands.

Putin has blessed the deal, though he has said he had mixed feelings about the takeover of a large private company by a state one and suggested the government's hand was forced by a need to end the chronic conflict between BP and the tycoons.

Rosneft has met strong interest from Western banks to finance the deal, and sources familiar with the situation say it may eventually raise more than the $45 billion in cash it needs to pay for the transaction.

BP will reinvest some of the cash proceeds of the deal to buy Rosneft shares from the Russian state, coming out with a stake of nearly 20 percent.

MANAGEMENT SHAKEUP

Rosneft, headed by Igor Sechin, a close Putin ally, is now confronted with the task of combining the operations of two major producers while also implementing a raft of exploration deals concluded earlier with BP rivals.

In a statement, Sechin said he expected the takeover to be "strategically attractive for the shareholders of Rosneft."

"The agreements reached put us in the position to immediately begin preparing the integration process," he added.

Industry sources say Rosneft, which signed Arctic exploration deals with Exxon, Statoil and Eni before BP's new role as a minority shareholder in Rosneft was announced, could struggle to juggle four foreign partners with rival interests.

A Rosneft spokesman said Zeljko Runje, who helped negotiate a landmark Arctic exploration deal between Rosneft and ExxonMobil when he was in charge of government relations at the U.S. major's Moscow office, would replace the long-serving head of upstream, Gani Gilayev.

Sechin has said he wants to reform Rosneft's bloated management, hiring consultants to make recommendations on a more efficient structure and promising to cut back a ballooning head office.

Gilayev's departure from the post appeared to be part of a wider shake-up. The spokesman said the head of human resources and a senior staffer in Sechin's office had also been replaced, following an influx of foreign executives and a purge of the oil company's trading staff.

One of the senior foreign executives at Rosneft, former BP executive Larry Bates, who was in charge of implementing a raft of joint drilling and asset swap agreements, is also likely to leave, a senior Russian oil industry source said.

"It looks like Sechin's men are getting promoted," the source said.