Ruias successfully close Essar Energy open offer

Taking its holding to 99.11%, Essar Global Fund ended the open offer on Friday

India’s billionaire Ruias family, which stuck to the 70 pence a share offer in its formal bid for buying out minority stake holders in its London-listed Essar Energy, has finally achieved 99.11% holding following the close of open offer on Friday. Now the company is sending statutory notice to holders of outstanding shares to complete it delisting move.

“Bidco expects that such outstanding Essar Energy Shares will be compulsorily acquired on or shortly after 18 July  2014, being the date  of expiry of  six weeks from the date of  the statutory notice which  is being sent to  relevant Essar Energy Shareholders today,” said the company in a statement. Bidco is a subsidiary of Essar Global Fund Ltd (EGFL), that made the offer to buy back shares. The Ruias floated EGFL and are its beneficiaries.

The move by the Ruias had run into opposition from the company’s committee of independent directors. Slamming the offer, it had asked holders of shares and bonds to take no action. The formal offer made on March 14 represented a premium of approximately 17% on the closing price of 60 p for Essar Energy’s share. This valued the remaining stake and convertible bonds in the company at $793 million.

Essar Energy’s assets include the Stanlow oil refinery in Northwest England, besides power stations and oil refining facilities in India. It raised £1.3 billion by listing its shares on the London Stock Exchange (LSE) at 420p apiece in 2010. Following the listing, about 78% stake in the company was held by promoters and the rest was in the hands of minority shareholders. Since then, the company has had mixed fortunes, with project delays leading to a fall in the stock price to 60p a share before the formal offer. It is only now that things are looking up for some of its projects. Meanwhile, a change in regulations required the company to ensure a minimum 25% float by March 2014, which would have meant a three% reduction in Essar Energy’s promoters.

So, EGFL in February made an informal offer to buy the 22% stake in Essar Energy that it did not already own at 70p a share. It had also proposed to acquire 4.25% convertible bonds due in 2016, guaranteed by Essar Energy. The offer was rejected by the five-member independent board committee and minority shareholders such as Henderson Global Investors and Standard Life, which termed it opportunistic.

EGFL followed with a formal offer on March 15, without changing the price of 70p a share. The offer to accept the shares ended on Friday. EGFL got about 8.29% of Essar Energy in the open offer, taking its total holding to 86.28%. Then it extended the deadline to accept remaining shares to 6 June. The price offered by the Ruias had also faced opposition from the Association of British Insurers (ABI), one of the largest shareholder groups in the UK. ABI represents minority shareholders owning a 8.6% stake in Essar Energy.

It had made a representation to the UK government and the Indian high commissioner, saying the move will damage the integrity of the UK market. In 2013 Eurasian Natural Resources Corp successfully de-listed from the LSE despite opposition from a minority on the offer price. But it prompted the UK’s Financial Conduct Authority to rework its de-listing rules. Under the new rules,   effective from May 16, de-listing require 80% shareholder approval. The company achieved 86.28% holding on 9 May and then extended the deadline to 6 June for acceptance of remaining shares. And now the offer has been closed.