Reliance Power and sister firm Reliance Natural Resources will consider a merger on Sunday, continuing a spree of activity in companies controlled by billionaire Anil Ambani since the end of a high-profile gas supply dispute with his brother.
Shares in Reliance Power, valued at $8.75 billion, closed up 3.3 per cent, while Reliance Natural shares, with a market capitalisation of $2.3 billion, ended down 1.9 per cent on Friday amid rampant market talk about a deal. The companies both announced a potential deal after the close of trading.
The boards RNRL and RPL will meet separately on July 4 to consider a merger, possibly through a share swap, the two companies informed the stock exchanges.
Marketmen feel this is a move aimed at consolidating and restructuring the holdings of the group companies.
"This is a move to restructure and review his business empire by Anil Ambani. This will consolidate his group's position and will help him take advantage of the synergies and become stronger. The share swap ratio will be the key for the merger," SMC Capitals equity head Jagannadham Thunuguntla told PTI.
"From a shareholder's perspective, the swap ratio holds the key," HDFC Securities head of private broking and wealth management Vinod Sharma said.
Analysts feel that in the short-run the RNRL scrip will come under pressure while that of RPL will gain if the merger goes through.
RNRL has the gas agreement and RPL has power plants. Without the one, the other will be incomplete. It is mutually beneficial, points out Sharma.
Reliance Natural had lost a May Supreme Court ruling in a long-running gas supply dispute with Reliance Industries, controlled by Anil's elder brother, Mukesh Ambani, who is the world's fourth-richest man.