Two Anil Ambani group firms propose $11 Billion merger deal

The boards of two energy firms belonging to the Reliance Anil Dhirubhai Ambani Group (ADAG) -- one in the business of generating power and the other that trades and transports oil and gas -- Sunday approved their merger in a $11-billion all-stock deal.

"The board of directors of Reliance Power and Reliance Natural Resources today approved a scheme of amalgamation of the two companies in an over Rs.50,000 crore ($11 billion) all stock deal," said an ADAG statement. 

The board also approved the conversion rate of four shares of Reliance Natural for every Reliance Power share. The exchange ratio was based on the valuation by global consultancy firm KPMG.

The proposed scheme is subject to approvals of the shareholders of the the two companies, the stock exchanges and the Bombay High Court, among other statutory requisites and permissions.

The group said the deal would bring "substantial benefits" to the shareholders of both the companies, as it would expedite a gas supply agreement with Mukesh Ambani controlled Reliance Industries.

The merger, thereby, will accelerate Reliance Power's plans to set up gas based power plants of over 8,000 mw capacity. Also, shareholders will gain from four coal bed methane blocks of Reliance Natural Resources and a 10 percent share in an oil and gas block in Mizoram.

Among other benefits that will accrue to the shareholders of the companies, the statement said, the merged entity will see cost efficiency for fuel supplies through Reliance Natural's coal supply logistics and shipping business.

Post the approval of the merger, Reliance Power's net worth will swell to over Rs.16,000 crore, having added around net worth of around Rs.1,900 crore o Reliance Natural.

The two companies had a market capitalisation of Rs.10,394 crore and Rs.41,979 crore respectively at closing bell Friday.

In fact, according to the statement, 80 percent of the shareholder of Reliance Natural Resources shareholders, also hold equity in Reliance Power, and had got their stake free of cost when the original Reliance empire was split.

"Reliance Natural Resources shareholders will benefit from the proposed amalgamation by participating in future growth prospects of Reliance Power's diversified generation portfolio of 37,000 mw," said the statement.

The group also has substantial coal reserves in India and abroad. Among Reliance Power projects are three ultra-mega power plants at Sasan in Madhya Pradesh, Tilaiya in Jharkhand and Krishnapatnam in Andhra Pradesh.

"Reliance Power will have over 6 million shareholders, the world's largest shareholding family, upon completion of the deal."