Ruias give Essar Energy minority shareholders 1 month to accept offer

The Ruias have given minority shareholders in Essar Energy a month to accept their offer for the remaining shares they don’t already own in the London-listed company.

Energy Bidco Holdings, a Mauritius-incorporated subsidiary of the Ruia’s investment vehicle, Essar Global Fund Ltd (EGFL), has set a deadline of 1 p.m. London time on May 9 for the acceptance of their offer of 70 pence per share, according to the offer document published on Friday.

The offer is conditional on it acquiring at least 90 per cent of Essar Energy shares by nominal value. It would then use rights conferred under Britain’s Company’s Act, 2006 to compulsorily acquire the remaining shares. It is being advised by VTB Capital.

Cayman Islands-headquartered EGFL first disclosed its plans to acquire the shares in Essar Energy in February, but the proposal was considered by an independent committee of Essar Energy’s board and swiftly rejected. However, the Ruia’s proceeded with the plans, announcing a formal bid for the 22 per cent they did not already own in March.

In the offer document, EGFL elaborates on the decision to take the company private.

Listing a host of reasons — from the 2011 sales tax liability ruling against Essar Oil to the UK refinery market — it noted the huge decline in Essar Energy’s share price over the past two years, and said it was proving challenging for “management to give reliable forward-looking guidance.” EGFL said it believed Essar Energy would be “better managed in the private domain.”

The independent committee, advised by JP Morgan Cazenove and Greehill, on Friday repeated their assessment that the offer “materially undervalues” the company and its prospects, and said they would be writing to shareholders and bondholders setting out their views in the next fortnight.

“In advance of receiving the independent committee’s views on the share offer, the independent committee recommends shareholders take no action in relation to the shares offer.”

When the plans were first announced in February, minority shareholders were quick to condemn it, with one – Standard Life Investments – branding the proposal “cynical opportunism” and a “calculated attempt” to deprive minority shareholders of future upside in the company.

Others have warned it could damage the reputation of London as a financial centre, pointing to a similar case last year where a Kazakh miner was taken private, despite an independent committee and minority investors condemning the move.

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