Essar oil fixes floor for delisting at Rs 146.05

Essar Oil today announced the floor price and other details of its long awaited delisting offer. In a public announcement published on Saturday, the company said the floor price worked out to Rs 146.05 according to the guidelines prescribed under Sebi delisting regulations.

The price is 30 per cent lower than Rs 210.15 a piece Essar Oil shares closed on the BSE on Friday. The final exit price would be decided through a reverse book building offer which will be open between December 15 and December 21.

Under the reverse book building process, bidders are required to bid for tendering their shares at prices lower than the floor price. JM Financial and Axis Capital are handling the offer.

Essar Oil’s board approved the delisting offer on June 22, 2014. Sebi Delisting regulations then prescribed the higher of the averages of weekly highs and lows of preceding two weeks and that of preceding 26 weeks would be determined as a floor price.

However, the offer was delayed by over a year as Sebi was investigating investor complaints against the company. In the meantime, Sebi amended the delisting regulations in March where it prescribed the elaborate formula prescribed under the Takeover Regulations.

Essar Oil said under the original delisting regulations, the floor price worked out to Rs 108.18.

Under the second method, a December 2013 transaction under which the company converted foreign currency convertibles into equity came into play. The company had converted two tranches of FCCBs totaling $262 million at prices of Rs 138 and Rs 153, respectively.

The weighted average of these two conversion prices, Rs 146.05, became the floor price, according to Essar.

According to the terms listed by the company, the delisting offer would go through only if a minimum of 92.56 million shares are tendered by the shareholders. That will take the promoter holding to the requisite 449.28 million (90 per cent mark). A minimum number of 50,003 public shareholders should participate.

Analysts feel that the company is unlikely to shore up enough response for the offer as a much better exit is available on the open market itself? The floor price is ridiculous. At this price it is a failed offer. Everyone knows there is a deal with Rosneft and Sebi has asked them to match the price paid by Rosneft. The price discovery will happen at substantially higher price.

The company has said its promoters are actively exploring various options in relation to divestment, reorganization. Towards this end, EEHL (Essar Energy Holdings) and EOGL (Essar Oil and Gas Ltd, Mauritius) have signed a non-binding term sheet on July 8, 2015 with OJSC Rosneft Oil company, a Russian Oil major, in respect of evaluating a transaction for Rosneft to participate in or acquire up to 49 per cent equity interest in the company ?

Essar oil shares which were trading around Rs 100 levels in early June, had almost doubled by the time the company announced the signing of term sheet on July 9.

Following investor complaints, Sebi, in November, asked the promoters to pay the difference if any between price paid by Rosneft and the delisting price discovered.