The Hindu Business Line : IOC awaits Govt nod for IBP merger

INDIAN Oil Corporation Ltd (IOC), which is in a consolidation mode starting with the merger of its wholly owned subsidiary Indian Oil Blending Ltd (IOBL) with itself, has now moved forward to get the mandatory Government approval for merging IBP Co Ltd with itself.

The proposal for the merger of IBP with IOC has been awaiting the necessary clearance since December. The matter was held up, since the Finance Ministry was questioning the swap ratio on the grounds that IBP had been over-valued. The Finance Ministry also felt that the merger would result in a reduction in the Government stake in IOC. Therefore, the Petroleum Ministry asked IOC to get a second opinion.

After due clarification and satisfying the queries of the nodal ministry, sources said that the swap ratio has again been put up for Cabinet approval. The sources also told Business Line that there had been no change in the ratio. A relative valuation of equity shares on behalf of IOC and IBP had been carried out, and the boards of both the companies had recommended a swap ratio of 125 shares of IOC for every 100 IBP shares.

The sources explained that following the Finance Ministry directive, IOC and IBP had written to their merchant bankers, J.P. Morgan and HSBC, respectively, asking them if there would be any breach of contract if the views of an independent valuator were sought.

Secondly, it was clarified that the swap ratio was not decided by the two merchant bankers, but by another company, Deloitte. This, according to the sources, put to rest questions about the valuation and the Finance Ministry was informed about it.

Currently, the Government's stake in IOC is 82.03 per cent with the remaining being held by the public, financial institutions and foreign institutional investors. At the end of March 2005, IOC held a 53.58 per cent stake in IBP with foreign institutional investors, banks, mutual funds and the public holding the rest.

Close on the heels of getting the approval for IOBL, the IOC board of directors also recommended that the Government approve the merger of its subsidiary company Bongaigaon Refinery & Petrochemicals Ltd (BRPL) with itself. The companies are in the process of appointing valuators to decide on the swap ratio. Once the swap ratio is decided and approved, the matter would be put before the Government for necessary approvals.

Incidentally, IOC is also looking at merging another subsidiary Chennai Petroleum Corporation Ltd (CPCL) with itself.

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