Largest FDI deal: Russian oil major Rosneft-led group acquires Essar Oil for $13 bn

Rosneft buys Essar OilLargest FDI deal: Russian oil major Rosneft-led group acquires Essar Oil for $13 bn

Russian oil giant Rosneft and its partners on Saturday acquired India’s second biggest private oil firm Essar Oil in an all-cash deal valued at about $13 billion. Essar Oil announced today that it is selling 98 per cent of Essar Oil to Russia‚Äôs Rosneft Oil Company and a consortium of traders led by Trafigura and United Capital Partners.

Rosneft bought a 49 percent stake in Essar Oil’s refinery port and petrol pumps, while Netherlands-based Trafigura Group Pte, one of the world’s biggest commodity trading companies, and Russian investment fund United Capital Partners split another 49 per cent equity equally.
The all-cash deal assigns an enterprise value (a total of equity and debt minus cash) of Rs. 72,800 crore for Essar Oil’s refining and fuel retail assets. An additional Rs. 13,300 crore will be paid for the adjacent Vadinar port and related infrastructure. Essar Oil operates India’s second largest refinery at Vadinar, Gujarat, with a capacity of 20 million tonnes per annum, a 1,010 MW captive power plant and a network of 2,700 operating fuel retail outlets.

“The first sale and purchase agreement envisages the sale of 49 percent to Petrol Complex Pte Ltd (a subsidiary of PJSC Rosneft Oil Company); the second envisages the sale of the remaining 49 percent 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 billion).


“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,” it said The deal would help the Essar Group, one of India’s largest and most indebted conglomerates, trim its about Rs 88,000 crore (over USD 13 billion) debt and ward off creditor pressure.
Essar Oil, part of a steel-to-ports conglomerate controlled by the billionaire Ruia brothers, operates a 405,000-barrels-a-day refinery at Vadinar in Gujarat. The refining complex also has a captive power plant as well as a port and terminal facilities.
The deal was announced in Goa today in the presence of Prime Minister Narendra Modi and Russian President Vladmir Putin, who are here for the ongoing BRICS summit. The deal is subject to regulatory approvals but is expected to close by the end of the current financial year. The acquisition is the biggest foreign acquisition ever in India and Russia’s largest outbound deal.

 

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