India: ONGC Approves Sale of ADB Stake in Petronet LNG
After GAIL, IOC and BPCL, the board of state-owned Oil and Natural Gas Corp (ONGC) has approved acquisition of Asian Development Bank’s (ADB) stake in Petronet LNG Ltd.
ADB had on August 23 offered to sell its 5.2 per cent stake in Petronet, in which the four state-owned oil and gas companies hold 12.5 per cent stake each, sources privy to the development said.
Gas utility GAIL and refiners Indian Oil Corp (IOC) and Bharat Petroleum have already informed ADB of their decision to exercise their Right of First Purchase/Refusal on the multilateral lending agencies stake.
ONGC board on November 4 approved the share acquisition, the sources said, adding that the four the state-owned firms would need government approval for buying ADB stake.
Gaz de France International (GDFI) holds 10 per cent in PLL and also has first right over ADB stake. In case the French energy giants too decides to exercise its right, ADB’s 5.2 per cent stake will split between the five in proportion to their current shareholding.
While Indian state firms would get 1.08 per cent or 81.25 lakh shares each, GDFI would be eligible to 0.867 per cent.
Sources said GDFI is unlikely to exercise its rights and if that happens, ADB’s 5.2 per cent stake will be split equally among the four promoters.
The price payable to ADB would the lower of either the average of the weekly high and low of the closing price of PLL during six months preceding the date of purchase, or the average of the weekly high and low of the closing price of PLL during the last two weeks preceding the date of purchase.
For 81.25 lakh shares, the consideration works out to about Rs 120 crore, sources said adding the promoters, as per the new takeover code, would have to make an open offer for acquiring a further 26 per cent stake from minority shareholders if they buy the shares in one transaction.
A staggered purchase may not trigger the open offer requirement.
Sources said the PLL’s constitution states that participation of PSUs would be to the extent of 50 per cent and the joint venture company would not be a government company.
However, legal opinion taken by the promoters states that PLL would not be considered as a government company, following an acquisition of additional equity by the PSUs from ADB.
This is because neither of the conditions specified in Section 617 of the Companies Act would be met in case of PLL. The conditions are at least 50 per cent of the paid up capital of PLL should be held by central government or by one or more state governments; or PLL should be a subsidiary of a government company.
The immediate fallout of the acquisition would be that PLL would come under purview of government agencies like CAG, they said.
Source: economictimes, November 7, 2011; Image: petronet lng