State-owned Power Finance Corporation Limited (PFC) has acquired the Centre’s 52.63% paid-up share capital in Rural Electrification Corporation (REC) Limited for Rs 14,500 crore.
“PFC has today signed a Share Purchase Agreement to acquire 103.94 crore equity shares of Rs 10/- each, of REC Limited from the President of India constituting 52.63% of the paid-up share capital of REC Limited. This is a major milestone achieved by PFC, who is now slated to become a promoter and the holding company of REC Limited,” PFC said in a public statement.
In December 2018, the Cabinet Committee for Economic Affairs (CCEA) approved the sale of central government’s existing 52.63 per cent equity in REC to PFC along with the transfer of management control.
In its statement, PFC said post the shareholders’ approval, the board approved the acquisition at a cash purchase consideration of Rs 139.50 per share with a total acquisition cost of about Rs 14,500 crore.
The closing price of REC on 19 March, 2019 was Rs 148.40 per share. The consideration for the transaction is expected to be paid on 28 March, 2019 and funds for the same have been arranged by PFC already, said the company. “The acquisition would enable increased efficiencies in lending processes and policies across both the institutions and would create public value by offering better loan products to the power sector.”
Deloitte Touche Tohmatsu India LLP was the advisor and L&L Partners (formerly Luthra & Luthra Law Offices) was the legal advisor for the transaction. SBI Capital Markets Limited is the Valuer.
“The convergence between the entities as combined group entities would help the power sector reap benefits from a decentralized outreach of REC and a professional project finance expertise of PFC. Further, the ensuing diversification of assets of the group, as well as portfolio risk would help in the resolution of stressed power sector assets of the group in a better and coordinated manner,” PFC said.
