Financial Daily from THE HINDU group of publications
Tuesday, Apr 09, 2002
Mergers & Acquisitions
Corporate - Mergers & Acquisitions
Group investment cos may sell stake in RIL -- Merger gets shareholders' nod
ARE YOU LISTENING?: Mr Dhirubhai Ambani, Chairman, Reliance Industries, flanked by Mr Anil Ambani, Managing Director, and Mr Mukesh Ambani, Vice-Chairman, at the company's shareholders' meeting in Mumbai on Monday.
MUMBAI, April 8
RELIANCE may sell the shares held by the group investment companies in Reliance Industries Ltd after the merger of Reliance Petroleum Ltd with it and use the proceeds for acquisitions in India or abroad, Mr Dhirubhai Ambani, Chairman, RIL, said on Monday.
At the current market price, the holdings of investment companies in RIL are valued over Rs 5,400 crore.
Mr Ambani was speaking at RIL's extraordinary general meeting held on Monday on the directions of Mumbai High Court for seeking shareholders' approval for the proposed merger between RIL and RPL.
"These shareholdings may be leveraged to pursue significant acquisition and other growth opportunities in domestic and international markets, including by way of monetisation of this equity stake,'' Mr Ambani said.
RIL shareholders approved the merger at the meeting. The resolution was passed with a 99.95 per cent majority, said a press release.
The equity share capital of the merged entity is expected to be Rs 1,396 crore with total assets at Rs 55,000 crore. The merger will make RIL the country's first private sector Fortune 500 company.
Post-merger, sales are expected to be Rs 58,000 crore while profits are to go up to Rs 4,000 crore, with a market capitalisation of Rs 45,000 crore.
"The merger will enhance RIL's flexibility, particularly in the context of its own E&P and infocom sector initiatives and the Government's approach towards hydrocarbon sector reforms, deregulation of marketing of petroleum products and the privatisation of public sector enterprises,'' Mr Ambani said.
He said the company would like to focus on the size and scale of its operations relative to global energy companies. The merger had considered factors such as hydrocarbon sector reforms, APM dismantling and the proposed privatisation of HPCL and BPCL.
Some of the shareholders of Reliance Petroleum Ltd present at the EGM, however, expressed dissatisfaction at the merger ratio of one RIL share for every 11 RPL shares, proposed by the company.
The share swap ratio is based on valuations made by advisors PricewaterhouseCoopers and SB Billimoria & Co, jointly appointed by RIL and RPL.
"The proposed merger ratio is detrimental to RPL shareholders. Last year, RPL had declared a dividend of 50 paise. This ratio will not be fair to us. It could have at least been 7:1,'' Brigadier Virmani said at the EGM.
Mr Ambani, however, did not reply to any of the comments or queries of the shareholders and the proposal was put to vote immediately. He is expected to answer queries at the annual general meeting to be held shortly.
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