Financial Daily from THE HINDU group of publications
Saturday, Dec 21, 2002
Corporate - Open Offers
Reliance open offer for 20% in BSES Deal to cost Rs 743 crore at Rs 230.10 a share
MUMBAI, Dec. 20
THE Rs 65,000-crore Reliance Industries today announced an open offer to acquire 20 per cent equity in BSES Ltd at Rs 230.10 per share, a move that would give the petrochemicals giant full control of the Mumbai-based power utility. The offer, made along with RIL's wholly owned subsidiary, Reliance Power Ventures Ltd, will open on January 17, 2003 and close on February 15, 2003.
This is the second time in as many years that RIL, which is already the single largest shareholder in the generation and distribution company with a holding of 43.43 per cent, is making an open offer to buy shares of BSES. Reliance would spend Rs 743 crore, generated mainly from internal sources, to finance the acquisition, an RIL news release said here.
Reliance has repeatedly said that BSES will be its vehicle for investments in the power sector. It had also mooted a proposal to sell power properties such as those at Patalganga and Jamnagar, owned by group companies to BSES. However, the proposal has not yet fructified.
Commenting on the open offer, Mr Anil Ambani, Vice-Chairman Managing Director, RIL, said, "The open offer for acquisition of BSES reflects our commitment to the development of the power sector, a core infrastructural area, for acceleration of the country's future economic growth. We believe this step is in the best interests of both the companies, and will significantly contribute to enhancement of overall shareholder value for Reliance and BSES."
The open offer price represents a premium of over seven per cent to the 26 weeks' average price of the BSES stock and a premium of nearly three per cent to its closing market price on December 20, the release said. The BSES scrip closed at Rs 225.20 on the Bombay Stock Exchange.
As per a BSE filing on September 30, Reliance Industries, along with Reliance Power and Reliance Industrial Investments and Holdings Ltd, holds about 43 per cent in the company while banks and financial institutions together hold 36.6 per cent. Foreign institutional investors hold 2.44 per cent, GDR holders have 3.69 per cent and the public owns 12.82 per cent.
It has to be seen how FIs react to the open offer as they had earlier rejected RIL's offer, which was at a higher price. A top institutional source told Business Line today that the major stakeholders would meet in a couple of days to take a view on the open offer.
"An indication (on FIs' decision) will be available in a couple of days. It is too early to say anything now. One should keep in mind that the FIs had refused to sell at Rs 234 last time which was higher than the current offer price," said the official.
In May 2000, RIL had made an open offer for acquiring 20 per cent of BSES at a price of Rs 234.60 per share. The price was later revised to Rs 255 per share. It had picked up almost 12 per cent then, increasing its stake from 14.82 per cent to 26.68 per cent.
BSES Ltd is the largest private power distributor in India with operations in Mumbai, Delhi and Orissa. FIs have been having a tug-of-war with the Reliance group for the control of the professionally managed company. According to sources, FIs have until now tried to thwart efforts by RIL to gain majority control of BSES. They had not participated in the open offer of May 2000 saying that the price was too low. The Ambanis now appear to have gained the upper hand, say analysts.
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