Rosneft and Investment Consortium Led by Trafigura Sign Agreements to Acquire 98% in Essar Oil
Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited—companies incorporated and managed under the laws of Mauritius—the controlling shareholders of Essar Oil Limited (EOL) have entered into separate definitive agreements for the sale of 98% of EOL. The first sale and purchase agreement envisages the sale of 49% to Petrol Complex Pte. Ltd (a subsidiary of PJSC Rosneft Oil Company); the second envisages the sale of the remaining 49% to Kesani Enterprises Company Limited (owned by a consortium led by Trafigura and United Capital Partners) at an enterprise valuation of Rs 72,800 crore ($10.9 bn) (the “Transaction”). An additional Rs 13,300 crore ($2 billion) will be paid for the acquisition of Vadinar Port, which has world-class storage and import/export facilities.
The business transaction was announced in the august presence of Mr Narendra Modi, Honourable Prime Minister of India, and Mr Vladimir Putin, Honourable President of the Russian Federation, at the BRICS Summit in Goa (India).
The all-cash deal encompasses EOL’s 20 million tonne refinery in Gujarat, India, and its pan-India retail outlets. The closing of the Transaction is conditional upon receiving requisite regulatory approvals and other customary conditions. The Parties expect to obtain the relevant approvals before the end of this year.
Investing in EOL, which operates one of the world’s most complex refineries and runs India’s largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term. The growth for refined petroleum products in the Indian market for the next five years is expected to be in the 5%-7% range.
EOL’s value has also been strengthened by the integrated nature of its business and the strategic positioning of its assets. Its 20 million tonne oil refinery in Vadinar, which accounts for 9% of India’s total refining output, is supported by a 1,010 MW captive power plant, and complemented by a network of around 2,700 operating retail outlets. The additional Rs 13,300 crore that the new stakeholders have agreed to pay is for the 58 million tonne deep draft port in Vadinar that helps in importing crude and exporting finished products.
Rosneft Oil Company is the world’s largest petroleum company with revenues in excess of $80 billion. The Company’s main business activities include exploration & production, refining and product marketing in Russia and across countries in North America, Latin America, Europe, Asia and the Middle East.
Trafigura Group is one of the world’s leading independent commodity trading and logistics group of companies with revenues of approximately $100 billion. United Capital Partners (UCP) is a large independent Russian private investment group with investments of over $3.5 billion in various industrial sectors.
The Transaction is the single largest tranche of foreign direct investment in India, and re-establishes the image of India as an attractive destination for foreign investments. Earlier in 2007, Essar Group, together with Hutchison Whampoa, brought Vodafone into India through an $11.1-billion transaction. With the current Transaction, this is the
second instance that Essar has brought in world leaders in the sector to participate in the India growth story.
Essar Group Chairman, Mr Shashi Ruia, said: “It is a historic day for Essar. The transaction demonstrates our unique ability to build world-class assets and create immense value in our businesses. The monetisation of our stake in Essar Oil will help drive the next level of growth for our other businesses.”
Mr Prashant Ruia, Director, and Essar, said: “We have once again reinforced our unique expertise in project incubation, execution, value creation and monetisation. We have established world-class assets that have attracted the attention of leading global companies and investors. The deals we have done have led to an FDI infusion of more than $30 billion into India.”
Mr Igor Sechin, CEO, Rosneft, said: “This is a significant milestone for the Company. Rosneft is entering one of the most promising and fast-growing world markets. At the same time, this project provides unique opportunities for synergies with the existing assets of the Company and is consistent with Rosneft’s enhanced presence in the fast growing markets of other APR countries, such as Indonesia, Vietnam and The Philippines.”
Mr Jeremy Weir, Chief Executive Officer of Trafigura, said: “This is an important and exciting investment. Essar Oil occupies a strategic position in the global oil market and owns world-class refining and infrastructure assets that will create multiple synergies with our trading business.”
Mr Ilya Sherbovich, Managing Partner of UCP, stated: “We are very pleased to reach an agreement to acquire shares of Essar Oil Limited. This is a top-tier asset operating in the promising Indian market, one of the largest and rapidly developing economies in the world. The announced transaction establishes a strategic partnership between our investment consortium members. Deal participants have extensive operational and financial expertise, which we believe will help to unlock significant value and provide strong financial results for all investors.”