New Delhi: Reliance Natural Resources and Reliance Power agreed to merge in a share-swap deal as billionaire Anil Ambani moved to consolidate his businesses after scrapping a non-compete accord with his brother, Asia's richest man.
The merger will be carried out through the exchange of one Reliance Power share for every four Reliance Natural shares, according to an emailed Reliance Anil Dhirubhai Ambani Group statement.
The transaction is valued at as much as Rs500 billion (Dh40 billion) based on valuations done by KPMG, which didn't say when investor approval would be sought.
"The merger may not be very positive because Reliance Natural doesn't bring much to Reliance Power and it may only lead to a dilution of value," Madanagopal Ramu, a Mumbai-based analyst with Centrum Broking who recommends investors hold the shares, said on July 2.
Fuelling a feud
Anil and his billionaire brother Mukesh, who controls Reliance Industries, India's largest natural gas producer, agreed in May to drop a non-compete accord that helped fuel a feud after they split the family business.
India's Supreme Court earlier that month ordered Reliance Natural, which gets fuel for Reliance Anil Dhirubhai Ambani Group's power projects, to buy natural gas from Reliance Industries in accordance with the federal government's policy.
Reliance Power gained 3.4 per cent, the most since June 15, to Rs175.30 in Mumbai trading.
Reliance Natural shares fell 1.5 per cent to Rs63.95, while the benchmark Sensitive Index fell 0.3 per cent. The two companies on July 2 said they would consider a merger.
India's top court's order meant Reliance Natural would buy gas from India's largest field, operated by Reliance Industries, on approval from the federal government and at a higher price than stated in the family agreement.
Reliance Natural and Reliance Industries said last month they signed a revised gas contract to comply with the court order.
By merging the companies, Reliance Power may be able to get gas through Reliance Natural's supply agreements without having to pay potential extra marketing margins, Deven Choksey, CEO of Mumbai-based KR Choksey Shares & Securities, has said.
"Reliance Natural's shareholders will benefit from the proposed amalgamation by participating in future growth prospects of Reliance Power's diversified generation portfolio of 37,000 megawatt, and its substantial coal reserves in India and abroad," according to the statement.
Reliance Power has power generation assets of 1,000 megawatts, according to its website.
It plans to build a total of 33,780 megawatts of capacity, CEO Jayarama Chalasani said on December 29.
