Monday,
March 4, 2002, Chandigarh, India
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Reliance Petro merges with RIL
Mumbai, March 3 Announcing the merger at a ratio of 1:11 (one RIL for 11 RPL shares) along with interim dividend of the two companies at a cost of Rs 900 crore, RIL Managing Director Anil Ambani said adding the group’s mainstay for the growth would be energy, infocom and financial services sector. “With a market capitalisation of Rs 49,000 crore, RPL’s merger with RIL is in line with the global industry trend to achieve size, scale and integration in upstream and downstream sector and also greater financial strength”, he told reporters here. The boards of both the companies this afternoon okayed the merger of RPL with RIL subject to necessary approvals and would be effective from April 1, 2001. Mr Ambani said the merger created India’s only world scale, fully integrated energy company with operations in oil and gas exploration and production, refining and marketing, petrochemicals, power and textiles. He said the recent developments in the ongoing reforms like hydrocarbon sector and deregulation, dismantling of the administered price mechanism, the government’s decision to grant marketing rights for transportation fuels to private sector and proposed divestment of HPCL and BPCL. Mr Ambani said under the proposed terms of the merger, 28 per cent of RPL shares held by RIL would be cancelled. RIL shares, against the holding of RPL shares by reliance Industrial Investments and Holdings Ltd constituting 7.5 per cent of the fully diluted share capital of RIL, with a value of over Rs 3,300 crore at the current market prices, would be directly issued to a trustee, to be held benefit of RIIHL and to realise substantial economic value, he said. RPL shares held by other RIL associates, representing 14 per cent of RPL’s equity share capital, would be exchanged into RIL shares and would constitute 4.7 per cent of RIL, with a value of Rs 2,100 crore, Mr Ambani said. “RIL will endeavour to monetise this aggregate economic value
Keeping his options open, he said the aggregate shareholding may also be leveraged to pursue significant
acquisition and other growth opportunities in domestic and international markets. Mr Ambani said the merger would lead to 32 per cent increase in RIL capital from Rs 1,053 crore to Rs 1,396 crore. With the merger, RIL’s current shareholding pattern is — promoters including the Ambanis, down by 10 per cent to 34 per cent, trustee for RIIHL — 7 per cent, RIL associates — 5 per cent, FIs/banks/mutual funds increased by 1 per cent to 14 per cent, foreign shareholding FIIs/ GDRs/ NRIs down by 5 per cent to 21 per cent and others at 19 per cent. Mr Ambani said as an integrated energy company RIL’s assets, valued at Rs 21,000 crore, include 25 offshore and onshore, deep and shallow water blocks of oil and gas exploration and production acreage over an area of over 175,000 square km, 30 per cent interest in Panna, Mukta and Tapti oil and gas fields, a 27 million tonne grassroot refinery and retail marketing assets for transportation of fuels in the fast growing domestic market. In addition, RIL also has a 26 per cent stake in Reliance Telecom and 45 per cent in Reliance Infocom. On the tax front, Mr Ambani agreed that RIL would benefit from the depreciation costs of RPL’s refinery which enjoys a seven-year-old holiday. “Yes, RPL’s depreciation will be a shield for RIL’s petrochemical business”, he answered to a question. Mr Ambani said the 1:11 exchange ratio has been determined on basis of joint valuation by Pricewaterhouse Coopers and S.B. Billimoria & Co, J.M. Morgan stanley acted as financial advisers to the transaction while Amarchand & Mangaldas & Suresh Shroff & Co were the legal advisers to the deal. When inquired on the decision to effect the deal from April 1, 2001, Mr Ambani said the date was appointed representing the first full year of commercial operations of RPL.
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