New Delhi: Oil and Natural Gas Corp (ONGC) suffered a big blow when UK’s takeover panel rejected its plea for more time to make a formal offer for acquisition of Imperial Energy Corp Plc.
ONGC Videsh Ltd, the overseas arm of the state-run firm, had sought extension of the 9 December deadline for making an offer to shareholders of Imperial as fall in international crude oil prices had seen its return on acquisition of the company plummeting.
UK takeover panel said its hearings committee has ruled that no extension was possible for making an offer to Imperial shareholders at the agreed price of 1,250 pence a share.
OVL had appealed to the hearings committee against the earlier ruling of the panel that said OVL cannot seek any extension.
Therefore OVL was required to post its offer document within 28 days from 11 November, i.e. by midnight on 9 December, 2008, as required by the takeover code, it said, adding OVL will not challenge the ruling. On 11 November, OVL had secured all approvals for acquisition of Imperial.
OVL had been seeking an extension as it may need to take a fresh Cabinet approval on acquiring UK-listed as fall in international crude oil price had drastically brought down the returns on the 1.4 billion-pound investment.
ONGC Videsh Ltd’s 1,250 pence a share bid gave the company a 10% internal rate of return (IRR) taking crude at $121 a barrel but with rupee depreciating by 20% against the dollar and crude falling to around $40 a barrel the IRR has come down to 3-4%.
“As IRR has plummeted, a fresh Cabinet approval may be required,” an official said.
Given the changed circumstances, there is a rethink in the government but OVL brass feels there is no going back.
OVL, the overseas arm of ONGC, has time till tomorrow to make an offer to Imperial shareholders to acquire all outstanding equity shares.
Stating that the fall in crude prices had changed valuations of Imperial, the official said that OVL has taken legal opinion on revising the price and has been advised that the ‘binding offer’ cannot be changed at this stage.
UK Takeover Panel can levy penalties and ‘force’ the Indian firm to complete the acquisition, OVL has told the Government.
“OVL has told us that they can’t go back on the deal now as it will hurt their reputation and there are legal implication,” he said.
An Empowered Committee of Secretaries last week deliberated on the issue but deferred a decision on if OVL needs to revise downwards the offer price.