Essar Oil fixes floor for delisting at Rs 146.05

Price fixed based on FCCB conversions in 2013; Reverse book building offer to open on Dec 15

In a public announcement, India’s second largest non-state oil refiner said the floor price to buy out the non-promoter shareholding of 28.54 per cent will be Rs 146.05.

The price is 30 per cent lower than Rs 210.15 per share, the level at which Essar Oil closed on the BSE on Friday. The final exit price would be decided through a reverse book building offer between December 15 and December 21.

Under the reverse book building process, one bids to tender stocks for sale above the floor price. JM Financial and Axis Capital are handling the offer.

Essar Oil’s board approved the delisting offer on June 22, 2014. According to Sebi’s delisting regulations, the floor price of a delisting stock cannot be less than the average of the weekly high and low closing prices in the 26 weeks preceding the date of the delisting resolution being passed, whichever is higher.

However, the offer was delayed by over a year as Sebi was investigating investor complaints against the company. Meanwhile, Sebi amended the delisting regulations in March prescribing the elaborate formula for takeover regulations.

Essar Oil said under the original delisting regulations, the floor price would have been Rs 108.18.

Under the new method, a December 2013 transaction under which the company converted foreign currency convertibles into equity came into play. The company had converted two tranches of FCCBs totalling $262 million at prices of  Rs 138 and Rs 153. The weighted average of these two conversion prices, Rs 146.05, became the floor price, according to Essar.

According to the terms listed by the company, the delisting offer would go through only if a minimum of 92.56 million shares are tendered by the shareholders. That will take the promoter holding to the requisite 449.28 million (90 per cent mark). A minimum of 50,003 public shareholders should participate for the offer to be a success.

Analysts feel the discovered price would be much higher as a much better exit is available on the open market itself. “The floor price is ridiculous. At this price, it is a failed offer. Everyone knows there is a deal with Rosneft and Sebi has asked them to match the price paid by Rosneft. The price discovery will happen at substantially higher level. Investors need not panic,” said Arun Kejriwal of Kejriwal Research and Information Services.

The company has said its promoters are actively exploring various options in relation to divestment and reorganisation. “Essar Energy Holdings and Essar Oil and Gas Ltd, Mauritius have signed a non-binding term sheet on July 8, 2015 with OJSC Rosneft Oil company, a Russian Oil major, in respect of evaluating a transaction for Rosneft to participate in or acquire up to 49 per cent equity interest in the company,” the announcement said.

Essar oil shares which were trading around Rs 100 levels in early June, had almost doubled by the time the company announced on July 9 that it had signed the term sheet.

Following investor complaints, Sebi, in November, asked the promoters to pay the difference, if any, between price paid by Rosneft and the delisting price discovered.
KEY DETAILS

92.56 mn shares
Minimum tender required for offer to succeed

Rs  146.05
Floor price

Rs  1,351 cr
Offer size for minimum tender @ floor price

142.48  mn shares
Total public shareholding

Rs 2,081 cr
Offer size for total public@ floor price

HOW DELISTING WILL TAKE PLACE

• Dec11: Despatch of offer letters
• Dec 15: Bid opening date
• Dec 18: Last date for revising bids
• Dec 21: Bid closing date
• Dec 30: Announcement of discovered price & exit price & promoter's decision

    Source: Essar oil Public announcement