Russian authority clears acquisition of Imperial Energy

The proposed acquisition of the UK listed Imperial Energy by state owned Oil  and natural Gas Corporation (ONGC) has crossed the major hurdle as the anti-trust agency of Russia, Federal Anti-Monopoly Service, has approved the transaction.

Due to delay in the approval by theRussian authority, the Indian company is set  to gain around $500 million, as sterling has depreciated by a whopping 20 per  cent to $1.58 from $1.98 in August, when the deal was announced.

Under the agreement, ONGC has committed to make the payment in sterling. At the current rate, now it will have to fork out $2.1 billion, as against original estimate of $2.6 billion.

“Yes the Russian approval has come,” said a senior ONGC official. Agencies quoted a spokesperson of the Russian anti-trust office as saying that the acquisition has already been approved.

The approval comes two days after Petroleum Minister Murli Deora, along with  ONGC Chairman and Managing Director RS Sharma and OVL Managing Director RS Butola met Russian Prime Minister Vladimir Putin. ONGC Videsh (OVL), ONGC’s overseas investment arm, applied to the Russian anti-trust agency over two months ago.

News of the approval drove up Imperial’s share price of the London Stock Exchange by 24 per cent to nearly 1,100 pence on Friday.

ONGC Videsh, the overseas arm of ONGC has already acquired over 15 per cent  stake in Imperial Energy, including 6.4 million shares representing 6.3 per cent  from the management and another 9.2 per cent from Baillie Gifford & Co.

Imperial Energy has its oil and gas assets in eastern Russia and north Kazakhstan.  It currently produces around 10,000 barrels of oil per day. It hopes  to  increase production to 35,000 barrels per day by the end of 2009 and 80,000 barrels per day by 2011.

The Imperial board has recommended ONGC’s bid in August at a 1,250 pence per share. At that point, Imperial’s share price on the London Stock Exchange was 800 pence and oil prices were over $120 per barrel. Oil prices have since  fallen to below $65 per barrel driving down Imperial’s share price to around 700 pence late last month.

Sharma had earlier said the company was ready to fund the entire acquisition  from its balance sheet. However, the company plans to raise around $1 billion  as a bridge loan from Deutsche Bank and lend OVL $1.1 billion at a below-market rate of 6 per cent.