ONGC Videsh Ltd, the wholly-owned subsidiary of Oil and Natural Gas Corporation, announced that it has acquired 15 per cent in UK-listed Imperial Energy and formally launched a negotiated takeover bid for the company at $2.6 billion (equivalent to around Rs 11,500 crore), which the company's board has approved.
In a cash deal, OVL has offered 1,250 pence per share. The bid is being submitted by Jarpeno Ltd, a wholly-owned OVL subsidiary registered in Cyprus.
The control over 15 per cent of Imperial Energy's stake is part of OVL's strategy to stall a counter-bid anticipated from China's Sinopec. It involves an irrevocable agreement with each of the directors to acquire 6.4 million shares representing 6.3 per cent at 1,250 pence a share. This includes executive chairman Peter Levine divesting 6.1 per cent.
OVL has also signed an agreement with institutional investor Baillie Gifford & Co to buy its 9.2 per cent stake at 1,250 pence. However, this agreement will lapse if any competing offer is made at 10 per cent above this offer (at 1,375 pence or above). This, in effect, means that the counter-offer cannot be below 1,375 pence.
In a regulatory filing to the London Stock Exchange on Tuesday, Peter Levine said, "Imperial Energy's Directors are pleased to have been able to reach an agreement with OVL and intend unanimously to recommend shareholders accept the proposed offer."
The deal, however, still requires shareholder approval to go through.
OVL Managing Director R S Butola said: "The acquisition represents an important addition to OVL's operations and we believe OVL's financial strength and technical expertise will enhance the attractive growth potential of the business in the Tomsk region."
Sources, however, said that Chinese petroleum major Sinopec has also started preliminary work on Imperial Energy and is expected to make a counter-bid.
After OVL submits a formal bid, shareholders need to approve or reject the transaction in 45 days, said an investment banker tracking Imperial Energy. Any company can put in a counter-bid during this period.
Imperial Energy, which raised $600 million through a rights issue and $191 million through convertible warrants in April this year, has a negligible debt of around $121 million.
After the conversion of the warrants, Imperial Energy will have 11.44 crore outstanding equity shares.
The company, a relatively small British oil and gas company based in Leeds in UK, has oil-producing blocks in the Tomsk region of western Siberia in Russia and Kastanai in north-central Kazakhstan.
It produced about 10,000 barrels of oil per day in December 2007 and plans to raise this to 80,000 barrels per day by the end of 2011.
The Russian Ministry of Natural Resources said Imperial's Russian Registered Reserves amount to about 450 million barrels of hydrocarbons.
Independent assessment of the reserves by DeGolyer and McNaughton in December 2007 suggested in-place reserves of 920 million barrels of oil equivalent, of which 470 million barrels is being developed.