In a specially-convened meeting of the Cabinet Committee on Economic Affairs, the government on Tuesday gave ONGC Videsh Ltd (OVL) the go ahead to buyout UK oil major — Imperial energy for 1.4 billion pounds ($2.6 billion).
OVL had sought government’s nod for the deal as the British regulator denied permission to defer its open offer. ONGC has to come up with the open offer by midnight of December 9 and the offer will remain open for the next 21 days.
The deal looks “unpleasant” under the current market conditions as crude oil prices have come down to $43 per barrel and the rupee has depreciated by 12.5 per cent against the dollar since the deal was announced. Also the share price of Imperial Energy is trading at a discount of 25 per cent to OVL’s offer of 1,250 pence a share.
Imperial Energy shares were up 10 per cent on Tuesday on the London Stock Exchange over its previous day close of 850 pence.
“The internal rate of return from the proposed acquisition has come down from 10 per cent at the time of bidding to 3-4 per cent at today’s price of crude oil,” said an official from the oil ministry.