ONGC finalises Imperial Energy acquisition terms news

Mumbai: Oil and Natural Gas Corporation (ONGC) of India has agreed to buy Imperial Energy of the UK for 1.4 billion ($2.6 billion), in perhaps its first acquisition of a major exploration and production company with overseas assets.

The cash offer values Imperial, which has oil and gas assets in Russia and Khazakistan, at 12.50 a share a 62 per cent premium to Imperial's share price on London's Alternative Investment Market on 11 July, the day before OVL, the overseas arm of ONGC announced the offer.

''Imperial Energy's directors are pleased to have been able to reach agreement with OVL and intend unanimously to recommend shareholders accept the proposed offer, which reflects a fair value and marks a premium of 62 per cent since the day before Imperial Energy first announced it had received an approach, Peter Levine, executive chairman of Imperial Energy, said.

Bidco, the bidding arm of OVL, had first proposed a bid of around 12.90, but the oil price fall since then and a worsening investment climate in Russia have kept bidders off.

On Tuesday, the boards of OVL and Imperial Energy announced having reached agreement on the terms of a recommended pre-conditional cash offer, to be made by Bidco, for the entire issued and to be issued ordinary share capital of Imperial Energy.

The two boards have also reached agreement on the terms of a recommended pre-conditional cash offer for the bonds and share offer for Imperial Energy under which Bidco will offer to acquire the Imperial Energy.

Under the terms of the convertible bond offer, Imperial Energy convertible bondholders will be entitled to receive 60,367.53 in cash for each $100,000 principal amount of the Imperial Energy convertible bonds. This reflects the adjusted exchange price of the Imperial Energy convertible bonds which applies in the event of a change of control of Imperial Energy.

OVL will now seek $1 billion in bridge financing for the Imperial acquisition, for which ONGC-OVL is in talks with Royal Bank of Scotland-ABN Amro combine and Deutsche Bank.

The posting of the offer document is pre-conditional on certain regulatory clearances being obtained, Imperial said in a statement.

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, Levine said.

''We are delighted that the Imperial Energy directors have taken the unanimous decision to recommend our offer," said RS Butola, managing director, OVL. "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.''

''We have been impressed with current management's track record to date and look forward to working closely with Imperial Energy's employees to develop the business in the future,'' he added.

Imperial explores for oil mainly in Siberia and has Russian reserves of about 920 million barrels of oil.

Chinese state-owned oil giant Sinopec, which has also been courting Imperial, is also still in the ring, according to sources close to the deal.

While any deal is expected to face regulatory hurdles in Russia, ONGC is reported to have received clearance from both Russian and Indian authorities.

State-owned Russian energy monopoly Gazprom had made a bid for Imperial Energy earlier and ONGC may now have to surrender some stake to either Gazprom or Rosneft, in keping with Rusian policies to ensure stake ownership in Rusian hands, sources point out.

While ONGC had bought large oil blocks overseas in the past, it has yet to make a large acquisition of a foreign exploration company.

Incorporated in Cyprus, Bidco is a wholly-owned subsidiary of OVL formed for the purpose of making bid offers.

Imperial Energy is an independent upstream oil exploration and production company focused on the Commonwealth of Independent States and, in particular, the Russian Federation. Imperial Energy is listed on the London Stock Exchange.