ONGC‘s overseas investment arm, ONGC Videsh Ltd (OVL), has pipped its Chinese rivals to acquire UK-basedfor $2.58 billion. The bid has been accepted by the board of Imperial at 1.25 pounds in cash for each share of Imperial Energy. The bid is at a 62% premium to 772 pence, the price at which Imperial was trading at when it ONGC’s approach in July.
China’s Sinopec Energy was also in the race. The deal has been unanimously recommended by the board of Imperial. The directors of Imperial Energy have committed their shareholding, which stands at approximately 6.3%. The institutional shareholding in Imperial exceeds 48%. Also under the deal Imperial Energy’s convertible bondholders would receive $111,629 for every $100,000 bond held.
Imperial Energy is a relatively small oil and gas company based in Leeds in UK and was founded in 2004. It is an upstream oil and gas exploration and production company focused on the Commonwealth of Independent States, and has oil producing blocks in Tomsk region of western Siberia in Russia and Kastanai in north-central Kazakhstan. For the fiscal year 2007, the company posted losses of $43 million over revenues of $20 million.
Imperial has a growing portfolio of oil and gas interests in West Siberia with only 10,000 barrels per day currently on stream but recoverable reserves estimated at 900,000 barrels. It has recently announced that its Russian registered reserves are about 450 million stock tank barrels of oil (mmbbls) of hydrocarbons. Imperial Energy was formed in 2004 and is a constituent of the FTSE 250 index. It has a market capitalisation of $2.34 billion and the shares of the company were trading at £1.29.
Imperial Energy recently raised around $600 million through a highly discounted rights issue, with an issue price of $12 per share. The issue was subscribed upto 97 per cent. The company went for a rights issue after it failed to raise debt due to the turmoil in the credit markets. This rights issue made the company’s share price fall by almost 25 per cent. Peter Levine, who founded the company, holds 6 per cent stake. Other major shareholders are Schroder with 10 per cent and Deutsche Bank with over 5 per cent. The other shareholders are Baille Gifford, Fidelity, Blackrock, S R Global Fund and J P Morgan Chase.
“Imperial Energy has grown significantly from a pure exploration company and as Imperial Energy moves into the next phase of its development, with production increasing further over the coming years, it makes strategic sense to be part of a larger group. The Share Offer fairly reflects Imperial Energy’s achievements and represents an excellent opportunity to realise a compelling value in cash,” said Peter Levine, Executive Chairman of Imperial Energy.
The deal will strengthen ONGC’s overseas presence, which currently stands at 38 oil and gas projects in 18 countries. In 2005, ONGC and the L.N. Mittal group combine had lost the bid to acquire PetroKazakhstan Inc to China National Petroleum Corporation, who acquired PetroKazakhstan for $4.18 billion.
“We are delighted that the Imperial Energy Directors have taken the unanimous decision to recommend our offer. The acquisition represents an important addition to OVL’s operations and we believe OVL’s financial strength and technical expertise will further enhance the attractive growth potential of the business in the Tomsk region. Additionally, we view this as an important opportunity to expand on the continuing co-operation between Russia and India in the energy sector,” said R.S. Butola, Managing Director of OVL.
Deutsche Bank was the financial adviser and corporate broker to OVL while Merrill Lynch & RBS Hoare Govett were the advisors to Imperial Energy.