Financial Daily from THE HINDU group of publications
Friday, Dec 23, 2005
Financial Daily from THE HINDU group of publications Friday, Dec 23, 2005 |
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Petroleum Corporate - Mergers & Acquisitions IBP-IOC merger: Swap ratio likely to be modified Richa Mishra
New Delhi , Dec. 22 THE swap ratio for the proposed merger of the IBP Co Ltd with Indian Oil Corporation Ltd (IndianOil) is likely to be modified. At a recent meeting, the Committee of Secretaries (CoS) is understood to have suggested that the two companies modify the current swap ratio of 1:1.25. (The committee gave a go-ahead for the merger proposal.) The boards of the two companies had approved the current swap ratio of 125 shares of IndianOil for every 100 IBP shares, on which the Finance Ministry had some reservations. The companies had on October 20 received in-principle nod from the Union Cabinet for the merger. However, there were some reservations on the proposed swap ratio. Sources told Business Line that the companies were examining the suggestions given by the CoS to reach a solution at the earliest. Indications are that the valuation process for arriving at the swap ratio will remain the same. IBP, which has taken the worst hit for selling petroleum products below cost, is optimistic about completing its merger procedure by March 2006. The Finance Ministry had voiced concerns that the proposal needed a review, as it was not favourable to the Government. The Finance Ministry held that IBP was overvalued in the merger and that it would result in a loss in the Government's stake in IndianOil following the merger. Currently, the Government's stake in IndianOil is 82.03 per cent with the rest being held by public, financial institutions and foreign institutional investors. By the end of September 2005, IndianOil held a 53.58 per cent stake in IBP with institutional investors holding 31.25 per cent, and others 15.17 per cent. The boards of the two companies approved the merger proposal in the middle of 2004 and the swap ratio was announced in December 2004. Further, the merger proposal has suggested the creation of a trust. This merger route would help IndianOil prevent losses from getting on to its books.
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