The Hindu : Business : OVL gets the go-ahead for Imperial buy

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Wednesday, Dec 10, 2008
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OVL gets the go-ahead for Imperial buy

Special Correspondent

The offer will remain open for 21 days and OVL would take another 14 days thereafter to make payments.

NEW DELHI: The Cabinet Committee on Economic Affairs (CCEA), at its special meeting on Tuesday, gave the crucial go-ahead to Oil and Natural Gas Corporation Videsh Ltd. (OVL) for acquiring U.K.-based Imperial Energy for $2.6 billion.

The approval had become necessary in view of the returns from the deal plummeting because of the steep fall in global stocks and crude prices.

OVL faced Tuesday deadline to make the offer to the Imperial Energy shareholders and therefore a special meeting of the CCEA was held. OVL had stated that it might face court proceedings for breaching a binding agreement if it were to default on a commitment to make a formal offer to Imperial shareholders by midnight Tuesday.

CCEA had in August given OVL a go-ahead for Imperial acquisition based on its projection of 10 per cent return on investment — taking crude oil price of $121 a barrel. But since then rupee has depreciated 20 per cent and crude has fallen to around $43 a barrel, sending the rate of return down to 3-4 per cent.

The company had valued Imperial’s proven and probable oil and gas reserves at $2.5-3 a barrel and the acquisition even at current oil prices was enormously beneficial, company officials said.

The offer would remain open for 21 days and OVL would take another 14 days thereafter to make payments to shareholders tendering their shares, the officials said.

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