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Essar Global Fund Limited (EGFL), the largest shareholder of London-listed Essar Energy, will conduct a private sale of 40-45 million shares, constituting 3-3.5 per cent, of the company to meet regulatory requirements in the UK.
Shares of Essar Energy were up over 5 per cent in Friday morning trading in London, reflecting market expectations ahead of the announcement that the stake of existing shareholders would have been diluted through a sale to the market (rather than through a private sale). The company has not yet set a timeline or buyer for the stake, but will have to do so before March 2014.
EGFL said that it would only be selling the minimum number of shares that it was required to under rules introduced two years ago by the FTSE Group, a subsidiary of the London Stock Exchange.
In December 2011, the FTSE Group announced that companies listed or seeking a listing in London would have to have at least 25 per cent of their shares freely traded, rather than the previous minimum of 15 per cent. The move was a response to calls from shareholder bodies for greater protections for minority shareholders, who had seen the value of their holdings in a number of large companies hit by tussles between larger stakeholders. Already listed firms were given two years to comply.
Earlier this month, the UK’s Financial Conduct Authority announced it would also be strengthening the protections for minority shareholders to ensure their active engagement, including giving independent shareholders a veto over deals between the company they had invested in and a major shareholder, which threatened the independent running of the company, and requiring independent directors to be approved by independent shareholders.
Essar Energy is set to report its results for the six months ending September on Monday. Ahead of the results Bank of America-Merrill Lynch said it was cutting its estimates for the company for the next three years following the sharp deterioration of the rupee to the US dollar, and weaker than expected refining margins in Asia, and a weak global refining market more generally.
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