OVL's 'terror' tactic to duck Imperial deal fails

Acquisition is on at the offer price of 1,250 pence per share.

It may sound bizarre, but in a bid to pull out of the proposed acquisition of the UK's Imperial Energy, ONGC Videsh (OVL), the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), has gone to the extent of taking refuge in Mumbai terror attacks.

OVL had approached the UK Takeover Panel, seeking more time for the acquisition, citing that Mumbai terror strikes had left the Union government with little time to approve its offer document.

In its submission before the panel, OVL had said: "In the wake of terrorist attacks, the government's attention is focused on establishing new measures (including anti-terror laws and a federal investigating agency) and strengthening the existing ones to counter the threat of terrorism. Consequently, the appropriate committee of the Indian government has not yet had a chance to convene to approve the offer document."

The request was shot down by the panel, which said the offer was made under Rule 2.5, making it mandatory for the acquirer to make a formal offer. Besides, a delay in making the offer would have a profound effect on the company being acquired and the market price of its shares.

According to the panel, OVL had approached its executive committee on December 4, seeking to defer the offer to December 19. ONGC had been trying to get out of the deal as prevailing conditions have made the acquisition unviable for the company. Between August, when the offer was made, and now, crude oil prices have crashed by a third to less than $45 from $130 a barrel, throwing the company's calculations out of gear.

OVL had made the offer to acquire Imperial Energy at 1,250 pence a share, aggregating to $2.1 billion.

On November 11, OVL had announced to acquire the UK company and said that all pre-conditions for the offer had been satisfied. Under UK takeover norms, OVL had a maximum of 28 days to make the formal offer, which was set to expire on December 9.

However, on the very last day — December 9 — OVL got the green light from the government to go ahead with the share purchase, which is now on at the offer price.