Reliance Industries in JV talks with US-based Nova Chemicals

Apart from Dow Chemicals, it is learnt that Reliance Industries is said to be in advanced stage of discussions with North American plastics and petrochemicals major Nova Chemicals as part of its bid to spread wings to foreign shores. The possible alliance could include product swaps, infrastructure sharing as well as joint exploration of business growth opportunities.

Nova Chemicals has a market capitalization of about $2.5 bn, and has seven manufacturing facilities in the US, six in Canada and two others in South America, while it is also present in Europe through various joint ventures. It has an annual turnover of over $6.5 bn.

Read more in the Business Standard article.
Related Post:
Reliance Industries giving shape to global ambitions; in talks with Carrefour, Dow Chemicals for strategic alliances

Reliance Industries giving shape to global ambitions; in talks with Carrefour, Dow Chemicals for strategic alliances

Reliance Industries is reportedly in talks with French retail major Carrefour as well as other global players for acquiring controlling stake in these companies to reach out to international consumers with its basket of Indian food produce.

Reliance has created a war-chest of Rs. 100,000 crores and is looking to create international business arms for accessing global markets by leveraging on its supply chain that was put in place as part of the farm-to-fork project. Besides Carrefour, Reliance is also talking to Tier-2 companies like Salisbury and Marks and Spencer for food business.

Carrefour on its part has denied any sort of discussions with Reliance for either a controlling stake in the former or a joint venture. In a related development, Reliance is also in talks with Dow Chemicals and is expected to form a petrochemical JV.

Reliance Industries likely to buy stake in Welspun Gujarat Stahl Rohren

Metal pipes manufacturer Welspun Gujarat Stahl Rohren Limited, the flagship company of the $1 bn-Welspun Group, may reportedly dilute its stake to Reliance Industries.

Reliance Industries wanted to have control in one of the steel pipe-making companies due to its larger interest in oil and gas where pipe companies have a larger role to play. The company recently has made two new natural gas discoveries in its east coast blocks in the Krishna-Godavari and Mahanadi basins. Moreover, the current global boom in oil and gas and spurt of investments in oil companies has sent pipeline demand skyrocketing across the world.

In December, ABN-AMRO picked up 0.67% stake by acquiring 900,000 equity shares of Welspun at a price of Rs. 93 each.

Meanwhile, Welspun Gujarat Stahl Rohren has earmarked an investment of Rs. 1300 crores funded through a mix of equity, overseas and domestic debt to set up a captive steel plant and plate mill. Its manufacturing facilities are located near Dahej in Gujarat.

In the global markets, Welspun Gujarat supplied pipes to oil and gas majors such as British Gas, Exxon Mobil, Shell and Saudi Aramco and in domestic front, it supplies to Gas Authority of India, Indian Oil, ONGC and Bharat Petroleum.

Read more in the DNA Money article.

Reliance Industries to merge IPCL with itself

Reliance Industries is considering merging group firm Indian Petrochemicals Corporation Limited with itself. The boards of both the companies will meet on March 10 to consider the plan. The merger, if approved, would add more than Rs. 11,000 crores to Reliance’s balance sheet and Rs. 1163 crores to its profits, based on IPCL’s fiscal 2006 financials.

Reliance Chairman Mukesh Ambani and his associates will hold nearly 53% stake in the merged entity after the conversion of preferential warrants. The promoters are in the process of subscribing to preferential warrants to scale up their stake by 4% from 50.4%. Reliance had paid Rs. 1491 crores to the NDA government in 2002 to take over 26% of IPCL’s equity. It came out with an open offer and increased its stake to 46%. The government now holds 0.35% in the company.

Post-merger, Reliance would offer end-to-end product solutions, which would give it a pan-Indian and perhaps Asian dominance. The merger could also result in substantial tax savings for the merged entity as Reliance buys certain products from IPCL and vice-versa. The merger may help Reliance increase its revenue from chemicals by as much as 4% to 48% of the total. IPCL uses naphtha made at the parent’s refinery as feedstock to make chemicals.

Read the Business Standard article.
Related Post:
Reliance Industries to form separate holding company for offshore oil assets

Reliance Industries to form separate holding company for offshore oil assets

Reliance Industries Limited will transfer all its overseas oil assets to a new company to be called as Reliance Exploration and Production DMCC, to be headquartered in Dubai. The subsidiary will first take over the assets Reliance has secured in the West Asian countries. Modeled on ONGC’s ONGC Videsh, the investment arm for ONGC’s overseas oil assets, the new Reliance subsidiary will be the holding company for all overseas upstream assets in oil and gas. This restructuring is being done to reduce the risks on Reliance’s balance sheet as many of these oil assets are in politically risk-prone areas.

Reliance earlier had confined itself mainly to exploration and production within India, but has now taken up overseas expansion in a major way. Armed with its success in the Krishna Godavari deep waters (KG basin), the company has been looking at opportunities in oil-rich nations including Russia and Central Asian countries. The political risks in these countries are huge and exposing Reliance to such uncertainties could impact valuations. The subsidiary was floated in the third quarter of 2006-07.

Reliance has interests in exploration of overseas blocks in Yemen and Oman. It has already made oil discoveries in the onshore Malik 9 block in Yemen. The development plan for the block has been approved by the Republic of Yemen and test production commenced in December 2005. In the Oman offshore block, where RIL is the operator, the existing seismic data has been collected and 2D reprocessing of data is underway.

Read The Economic Times article.

Temasek to invest $300 mn in TV channel; in talks with US PE funds, Reliance and media professionals

Temasek Holdings, the private equity arm of the Singapore government, is in talks with a clutch of Indian media professionals and business houses to set up a TV broadcasting company. The proposed company could rope in former CEO of Star TV Peter Mukerjea and Mukesh Ambani, the latter through his personal investment companies, as well as some US-based equity funds. The venture will operate news and current affairs as well as entertainment channels. Ambani, Temasek and US investors are to get 26% each and the remaining portion will be divided among Mukerjea and other professionals who join later. The channel would look at an investment of around $300 mn (roughly Rs. 1400 crores) in the next two to three years.

Read the Business Standard article.

Reliance Industries may bid for GE Plastics

Reliance Industries Limited (RIL) is reportedly planning a bid to acquire the plastics division of US-based industrial conglomerate General Electric (GE). This would be the largest outbound acquisition deal by an Indian company. The last acquisition made by RIL was German specialty polyester manufacturer and market leader Trevira for €80 mn (Rs. 430 crores). Early last year, Reliance Industries had made an unsuccessful $8-billion bid for British Petroleum’s Innovene.

GE Plastics had estimated revenues of $7 bn and is valued at around $10 bn. The plastics division contributes about 8% to GE’s total revenue and 5% to its net profit. However, factors such as increasing raw material costs, rising competition and a downtrend in the automobile industry, have hurt the company’s bottomline in the recent past. In the first three quarters of 2006, GE plastics’ revenue was flat at $5 bn, but operating profit dropped 13% to $560 mn. The possibility of the sale of the plastics business has been speculated for long time ever since GE chairman Jeffrey Immelt hinted that GE might pull out of some of its commodity businesses.

Reliance may not be the only one to bid for the GE unit; global petrochemicals majors such as Dow Chemicals, Rohm and Haas, PetroChina, BASF and DuPont as well as private equity funds, including Apollo Management, Blackstone Kohlberg Kravis Roberts (KKR) should also be interested in acquiring the company. US-based investment banking giant Goldman Sachs has been reportedly mandated by GE to coordinate with private equity firms and other companies interested in bidding for the company’s plastics division.

Reliance’s 3.5 mn tonne plastics business is largely commodity-led. Even though 30% of the volumes are exported, most of it is through the trading route, where margins are relatively low. It has a negligible presence in the superior engineering plastics business, which is largely used by auto components and consumer durable manufacturers. Reliance sees a good strategic fit with GE Plastics, if acquired.

Reliance is said to be exploring options for the bid; possibly a tie-up with Dow Chemicals. The US major has signed a MoU with Reliance to set up a unit in Reliance’s Jamnagar SEZ. In turn, Dow would offer a substantial stake in its struggling petrochemicals unit in the US. A formal announcement is expected anytime. Sources say the bid for GE Plastics is contingent on whether Reliance is able to expand its strategic relationship with Dow Chemicals.

Read the articles in The Economic Times – 1 2 and Business Standard.

The Adani Group in the process of selling retail business to Reliance

The Adani Group has initiated the process of selling off its retail business to Reliance Industries. The deal is estimated to be around Rs. 200 crores. Reliance Industries has started interviewing the Adani retail staff and will select people it wants to retain in the business.

Adani Retail operates a total of 54 outlets across Gujarat and sells groceries and apparel. With the acquisition Reliance will get access to over 54 supermarkets and hypermarkets across nine cities in Gujarat. The acquisition will provide a ready infrastructure to Reliance, as 60% of Adani’s retail outlets are company-owned. The acquisition formalities are expected to be fully completed in a couple of months.

For more details, read The Economic Times article.

Aban Offshore to acquire remaining stake of Norwegian company Sinvest for $800 mn

Chennai-based drilling rig operator Aban Offshore Limited has offered to acquire Norwegian drilling company Sinvest with an open offer of $800 mn on Oslo Stock Exchange. Aban holds around 39% of Sinvest’s equity. In June 2006, AOL had bought 33.76% stake in Sinvest for $446 mn in one of the largest cross-border acquisitions by an Indian company, through its Singapore subsidiary, Aban Singapore. Subsequently, the company had raised the stake by an additional purchase of 5.4% from the market. This had cost Aban around $82 mn, to make the total at $528 mn. The threshold limit for making an open offer is 40% under the Norwegian exchange.

The total deal size is expected to be around $1.3 bn. Aban has already spent $528 mn to acquire around 40% of Sinvest so far. This stake is currently held by Aban Singapore. Of this total investment, $450 mn is debt. Of the total additional $800 mn needed for the open offer, $625 mn will be debt. Thus, of the total $1.35 bn spent on the acquisition, $1.075 bn is debt. Sources say that Aban Offshore has availed the facilities of non-recourse debt. On the equity side, Aban Singapore is raising $150 mn via convertible notes by private placement. These notes will account for 10.37% of Aban Singapore’s equity after conversion, valuing Aban’s stake at $1.296 bn. The market cap of the parent company, Aban Offshore, was $1.462 bn at Friday’s closing price of Rs. 1, 383 on the BSE on Friday.

The open offer will be made by the Aban International Norway, a Norway-registered company and a wholly-owned subsidiary of Aban Singapore. The offer price set for Sinvest shares is Norwegian Kroner (NOK) 135, according to Oslo Stock Exchange filing by Aban.

Like Aban, Sinvest is also an owner of jack-up drilling rigs. Drilling rigs and offshore vessels are required for exploration and production of oil and gas. The charter rates for these rigs have shot up in the past few years due to the continued strength in oil prices and consequently, an increase in exploration activities globally. The offshore scene in India has also witnessed frenzy, with a large number of New Exploration and Licensing Policy (NELP) blocks in that space. Large gas discoveries by major operators like Reliance Industries, GSPC and ONGC in the recent past will also lead to higher demand for such rigs and offshore assets. India-based offshore companies have placed orders for six drilling rigs in 2006.

Read the Economic Times articles – 1 2.

ADAG-Shringar acquisiton talks fall out over valuation differences

The Anil Ambani led-ADAG group is in the news for another merger and acquisiton deal, and it seems that this may also go sour. Negotiations between ADAG and the Shroffs of Shringar Cinema for buying out Shringar seem to have hit a roadblock due to differences on the price that ADAG has reportedly offered to Shringar’s shareholders.

Reliance-ADAG was willing to offer Rs. 58 per share and an additional Rs. 15 was offered for a non-compete agreement to the Shroffs, promoters of Shringar Cinemas. The clause was to ensure that the future plans of the Shroffs don’t affect the Reliance-ADAG group, which already has an interest in the sector through Adlabs Films.

The deal would make Adlabs Films the biggest player in the multiplex business along with the Delhi-based PVR, which currently has close to 75 screens across the country. The acquisition would give Adlabs access to Shringar Cinemas’ approximately 35 screens, putting Adlabs at a total of about 78 screens pan-India.

It has been learnt that large stakeholders in Shringar Cinemas had expressed reservations on the differences in the price offered by ADAG to the promoters and to shareholders. Temasek Holdings, one of the largest shareholders in Shringar Cinemas with close to 14%, expressed its reservations on the pricing, even when the Shroff family had agreed to this deal in-principle. The owners of Shringar Cinemas have been in talks with large players, including the Mukesh Ambani-led Reliance Industries, but the talks had failed, again, due to valuation differences.

While the deal is off now, it is expected that talks between both parties could resume, as a consolidation in the multiplex space is inevitable. Shringar runs the Fame brand of multiplexes and plans to add seven to nine multiplexes each year to touch 227 screens across 50 sites by March 2011.

Read he article in The Economic Times.

Vodafone also in the race for Hutch

After Reliance, Maxis, Bharti and Essar itself, the Hutch-Essar JV seems to have found a new suitor. It seems that Vodafone, the British telecom giant, is reported to bid for Hutch-Essar. UBS, which is Vodafone’s house banker, is said to be advising the company on financing and acquisition strategies.

Both Vodafone and UBS have refused to comment on the development.

Vodafone is selling its stake in its holdings across market as it faces severe investor backlash. It sold its 25% stake in Swisscom for about $3.5 billion and a similar stake in a Belgian wireless operator to Belgacom; before that it had exited companies in both Sweden and Japan. The Japanese transaction was valued at about $16 billion.

In India, Vodafone has invested in a 10% stake in Bharti Airtel, the value of which now is estimated to be around Rs. 16, 000 crores. Vodafone might consider selling its stake in Bharti for financing the acquisition.

Read the article from The Economic Times.