(FE)
The government’s plan to build a mega oil PSU of global scale got a shot in the arm today with the Union Cabinet clearing the proposed acquisition of HPCL by ONGC. The sale of the 51.1% stake in state-run refining and marketing company HPCL, held by the government, to oil exploration and production firm ONGC could fetch the government about Rs 29,000 crore at current market prices.
However, there was no clarity yet on the price that ONGC will pay for the acquisition. Earlier this month, ET Now had reported that the government is considering asking it to shell out 405-50% premium for HPCL’s equity stake. Later, another news report said that ONGC officials are of the view that no premium is required to be paid since HPCL is openly traded in the market and is already fairly valued.
PMO steps in
Earlier June, there were news reports that the Prime Minister’s Office had expressed its disappointment on the slow progress on the amalgamation of Oil and Natural Gas Corp and Hindustan Petroleum Corp Ltd, following which, the Department of Disinvestment issued a Cabinet note on the proposed merger.
The government seems to have opted for acquisition route for combining the two companies, making HPCL a subsidiary of ONGC rather than merging the two. HPCL will retain its brand post merger. However, minority shareholders in HPCL may not gain or lose much from the deal, apart from the gain or loss in the share prices, as the deal will be exempt from the mandatory open offer required in cases of acquisition of more than 26% equity stake. The government will form a committee to frame the modalities and oversee the proposed merger.
