OVL open offer for Imperial Energy on Tuesday

NEW DELHI/MUMBAI: ONGC Videsh Ltd (OVL), the overseas investment arm of India's biggest oil explorer ONGC, will go ahead with its planned $2.1-billion purchase of Imperial Energy and meet the deadline for making an open offer to shareholders of the UK firm, a person close to the deal said.

Shares in Imperial lost 25% on Monday on fears OVL could walk out of the agreed deal, after UK authorities rejected the Indian company's request to delay making the open offer while it sought to renegotiate the deal.

"OVL will go ahead with the deal," the person, who is involved in the negotiations but asked not to be named, told ET.
The Cabinet is expected to meet on Tuesday morning to authorise OVL to go ahead with the deal despite big changes in the company's financial return projection because of the steep drop in oil prices.

The finance ministry has in the past expressed a view that ONGC should go ahead with the deal, given that the country needs to secure its energy supplies.

ONGC and OVL could have run the risk of a big damage to their reputation if they walked out of the deal at this stage, besides being exposed to civil and criminal action. There was no official word from ONGC and senior petroleum ministry officials were tight-lipped on the issue. A senior Cabinet minister with knowledge of the deal, however, felt that ONGC "will need to honour its commitments".

At the time of going to press, Imperial shares were mauled after the UK Takeover Panel's ruling left investors worried that OVL could walk out of the deal. The stock hit an all-time low of 770 pence, valuing the company at $1.15 billion���less than half OVL's bid. OVL's all-cash offer to buy Imperial was made at 1,250 pence a share.

Before the panel's ruling that rejected OVL's request to delay the deadline for the open offer, shares in Imperial, which has large proven oil reserves in Russia, were traded 4% higher at 1,065 pence in London.

Imperial's takeover by OVL cleared a key hurdle last month, but the steep drop in oil prices had caused great unease about the deal's terms and led to Indian authorities looking at ways to renegotiate the deal.

Jarpeno, a Cyprus-incorporated wholly-owned subsidiary of OVL that was being used for the acquisition, was exploring options of extending the open offer deadline under the UK takeover code.

But the UK Takeover Panel hearing OVL's request decided against any extension and the company will not appeal the order, a statement posted on the London Stock Exchange's website said. OVL was required to post its offer document within 28 days of November 11.

"The Executive had ruled that no such extension should be granted (and therefore OVL was required to post its offer document within 28 days of 11 November 2008, i.e. by midnight on 9 December 2008, as required by the Takeover Code) and that decision was challenged by OVL. ...The Committee upheld the Executive's ruling. OVL stated that it did not intend to appeal against the Committee's decision, which is accordingly final, " the Takeover Panel's posting said.

OVL officials were camped in London trying to renegotiate terms of the deal with Imperial, hours before the deadline for the open offer to the Imperial shareholders ended.

Analysts say the deal works out to around $2-2.5 a barrel for OVL, given Imperial's declared reserves of 900 million barrels and will help improve India's energy security. India meets almost 70% of its oil demand through imports. ONGC is being advised by Deutsche Bank. Merrill Lynch is advising Imperial.