New Delhi, July 23: Oil and Natural Gas Corporation (ONGC) will not be required to make an open offer to minority shareholders of Hindustan Petroleum Corporation (HPCL) after buying out government’s 51.11 per cent stake as the deal won’t trigger takeover norms as did the merger of Indian Oil Corporation (IOC) and Indo Burma Petroleum (IBP) in 2002, a senior government official said.
The Cabinet Committee on Economic Affairs (CCEA) last week gave in-principal approval of ONGC buying out government’s entire 51.11 per cent stake in fuel retailing and marketing company HPCL will continue to be a separately listed company.
ONGC will not have to make an open offer to minority shareholders of HPCL as the government’s holding is being transferred to another state-run firm, but the ownership isn’t really changing.
“Open offer is not required because the management complexion is not changing. So it is a related party transaction,” the officer said.
According to Sebi’s takeover code, if a company acquires more than 25 per cent in another listed company, it has to make an open offer to minority shareholders to buy at least 26 per cent more in the target firm.
Way back in February 2002, state-owned IOC had acquired government’s 33.58 per cent stake in fuel retailer IBP for Rs 1,153.68 crore and had to make an open offer for additional shares.
“IOC and IBP merger had happened through bidding route. Reliance Industries was among the bidders. That time, IBP was being offered for outright sale, so when management chose to sell through bidding, the open offer got triggered,” the official said, requesting anonymity.
In the present case, “in ONGC, I am transferring from direct government control to indirect holding,” he said.
The government is 51 per cent owner of HPCL and 68 per cent owner of ONGC.
From being a mere oil and gas producer, it will also have downstream oil refining and fuel retailing business. “When upstream business is down, downstream does great and vice versa. So now ONGC will be able to better manage its risks,” he said. “Through this vertical integration, what private sector could not achieve, the government has achieved,” he added.
HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries (RIL). PTI
