Financial News

  • 21 February 2014, 16:46

City Heavyweight's Fury Over Essar Energy Bid

A major City investor in Essar Energy, the India-based oil group planning a controversial takeover led by its founders, has joined the ranks of shareholders hoping to thwart the cut-price deal.

Sky News understands that Capital Research Global Investors, which owns about 3.5% of Essar Energy, is furious at a proposed 70p-a-share bid from a vehicle controlled by the Ruia family.

Capital, which is one of the world's most respected investment institutions, is understood to have expressed its displeasure at the offer earlier this week.

The Ruias are proposing the takeover less than four years after floating the oil refiner and power generator in London at six times the price they now want to pay.

Earlier this week, Standard Life Investments, Essar Energy's biggest institutional investor, denounced the move as "cynical opportunism".

David Cumming, head of equities at the fund manager, said it was "a calculated attempt to deprive minority shareholders of the substantial future upside in Essar Energy's valuation".

The presence of Capital Research on Essar Energy's share register is potentially problematic for the committee of independent directors set up to consider the founders' proposal.

Simon Murray, one of the non-executive directors on that committee, is also chairman of Gulf Keystone Petroleum, a London-listed oil explorer which has had a long-running battle with Capital Research over corporate governance standards.

The Ruias' vehicle has yet to spell out the structure or terms of an offer, although it is theoretically possible for them to compulsorily purchase the shares held by minority investors under certain scenarios.

That possibility further could threaten to undermine London's credibility as a listing venue for overseas companies, one of the principal successes of the City in recent years.

The independent directors of Essar Energy are being advised by JP Morgan, one of the investment banks which oversaw the company's listing in April 2010.

Those board members are expected to decide to appoint a further independent adviser in the next few days, according to a source close to the situation.

None of the parties involved would comment.

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