updated 12/17/2003 5:48:02 AM ET 2003-12-17T10:48:02

Russia’s Yukos oil company formally announced plans Wednesday to reverse its merger with smaller rival Sibneft, confirming the demise of a deal that unraveled after former Yukos chief Mikhail Khodorkovsky was jailed in October.

"The core shareholders have come to an agreement to conduct a deal to reverse the original takeover agreement," Yukos official Yuri Beilin told a news conference.

The announcement put an end to what would have been Russia’s largest-ever corporate merger, creating a company that was valued at $36 billion at the time of its original announcement in April.

The merger was abruptly suspended last month on the day it was to be finalized, amid analyst speculation that Sibneft was pushing for control of the merged company — a demand Yukos core shareholders rejected.

Yukos, Russia’s largest oil producer, has been the target of a wide-ranging government probe that culminated with Khodorkovsky’s Oct. 25 arrest on charges including tax evasion and fraud, and the subsequent freezing of about 40 percent of the company’s shares.

He subsequently resigned from the company.

Many see the investigation as a move to curb the growing financial and political clout of Khodorkovsky, who financed several opposition parties in the outgoing parliament. President Vladimir Putin has denied political motives are behind the probe.

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