Reliance bitten by acquisition bug

Reliance Industries Limited (RIL) is all set make India's first major acquisitions in the exploration and production, and the petrochemical sectors in Europe.

The country's largest company, in terms of market capital, is in an advanced stage of discussion to acquire Premier Oil, a United Kingdom (UK) based company, and the Belgian division of British Petroleum (BP).

The combined size of the two deals is expected to be at least $4 billion (Rs 18,000 crore). Premier Oil, listed on the London Stock Exchange and engaged in the exploration and production business, has a current market capitalisation of $2 billion.

Sources close to the deal said the acquisition cost of this company would be marginally above its current market cap.

The petrochemical division of BP is also expected to be valued around $2 billion. Sources said RIL chairman and managing director Mukesh Ambani is scheduled to meet Belgian Prime Minister Guy Verhofstadt on November 7 in Mumbai to tie up the loose ends of the deal.

When contacted, a spokesperson for RIL refused to comment. However, sources said the RIL's board meeting is scheduled for November 9, at which the management will take the board's approval to raise $2 billion from the overseas market through various means, including foreign currency convertible bonds.

Although the deal structures and their funding pattern are yet to be known, the sources said that both the acquisitions would be made through a leverage buyout, in which the future cash flow of the companies to be acquired will be used as collateral.

If the deals materialise, they would be the second and third multi-billion-dollar acquisitions by an Indian company. Last month, Tata Steel had made a negotiated bid worth $7.6 billion for the Anglo British steel major, the Corus Group.

Premier Oil has interests in exploration blocks in India, Pakistan, Indonesia, Vietnam, besides those in North Sea and West Africa. Without disclosing the name of its prospective buyer, it confirmed that it had received a preliminary and conditional proposal for its acquisition.

"The proposal is subject to a number of conditions, including due diligence and financing. A further announcement will be made when appropriate," a company statement said.

The Belgian division of BP is engaged in the production of purified terephtalic acid (PTA), purified isophtalic acid (PIA), polyethylene terephthalate (PET) bottles and paraxylene, the raw material for PTA. The plant, located in Antwerp, has a combined capacity of 2 million tonnes.

Email Arun Kumar: arunkumar@hindustantimes.com