RIL absorbs RPL in Rs 8,500 cr deal

Mumbai, Mar 2 (PTI) India's Reliance Industries Monday
offered its one share for every 16 held in Reliance Petroleum
to absorb the refining unit in an share merger deal that is
valued at an estimated Rs 8,500 crore.

The move that will catapult RIL to top 20 oil refiners in
the world with a market capitalisation of about USD 47 billion
at present price level, however, saw investors in both the
Mukesh Ambani Group companies losing nearly Rs 6,800 crore in
a day as share prices declined on the Bombay Stock Exchange.

RIL chairman Mukesh Ambani said "this merger follows
Reliance Industries' philosophy of creating enduring value for
all our shareholders".

As part of the merger deal approved by the boards of the
two companies, RIL will issue 6.92 crore new shares -- which
are worth about Rs 8,500 crore at current market prices.
However, the record date for the share transaction has not
been disclosed yet.

After the share-swapping, RIL would have 3.7 million
shareholders and the promoters holdings, including that of its
chairman Mukesh Ambani, will fall by 2 percent to 47 percent.

RIL is holding of 70.38 per cent in RPL which would be
cancelled on absorption.

This is the fourth instance where RIL has absorbed one
of its subsidiaries, the previous one being 7 years ago when
Reliance Petroleum was merged with it.

RIL also said it will buy back US energy major Chevron's
five per cent stake in RPL for Rs 1,350 crore.

"The shares will be bought at Rs 60 a share, as per
the agreement," RIL's CFO Alok Agarwal said.

RIL has set April 1 for the date for amalgamation with
RPL. "The merger will unlock significant operational and
financial synergies existing between RIL and RPL," it said.

The merger will help RIL displace state-owned Indian Oil
as the top refiner in the country with a combined capacity of
62 million tons a year. It also push down Chevron on the world
list to take its 13th position.

Agarwal said the merger will be tax neutral for both the
entities. The parent firm's 33 million tons export-oriented
refinery and RPL's just commissioned 29 million tons SEZ
refinery would be accounted separately. "Both refineries will
retain their tax benefits".

Meanwhile, the combined market capitalisation of RIL and
RPL saw a an erosion of Rs 6,752 crore after the shares of the
two firms declined over 3 and 1 per cent respectively on BSE.

RIL's market valuation dropped by Rs 6,279.74 crore to Rs
1,92,813.82 crore, while RPL's fell by Rs 472.5 crore at Rs
3,3817.50 crore.

Shares of RIL, the heaviest in the elite Sensex group,
closed down 3.15 per cent. RPL also closed lower by 1.38 per
cent, though anaysts said the swap ratio 16:1 was slightly in
advantage to the refining company.