Boards approves merger of Reliance Industries and Reliance Petroleum

Boards approves merger of Reliance

Reliance Petroleum Limited (RPL) is a Reliance Industries Limited subsidiary. RPL is constructing a greenfield petroleum refinery and polypropylene factory in Gujarat’s Jamnagar Special Economic Zone. RPL will be the world’s sixth largest refinery, with an annual crude processing capacity of 580,000 barrels per stream day (BPSD).

Reliance
  • Merger is India’s largest ever
  • RPL shareholders to receive 1 (one) share of RIL for every 16 (sixteen) shares of RPL
  • RIL’s holding in RPL to be cancelled. No fresh treasury stock created
  • RIL to be a top 10 private sector refining company globally
  • RIL to become the world’s largest producer of Ultra Clean Fuels at single location
  • Merger to unlock greater efficiency from scale
  • Merger to be EPS accretive
  • RIL to have 3.7 million shareholders

MUMBAI: Reliance Industries Limited (RIL) and Reliance Petroleum Limited (RPL) Boards of Directors overwhelmingly supported RPL’s merger with RIL today, subject to regulatory approvals. Both boards recommend an exchange ratio of 1 (one) share of RIL for every 16 (sixteen) shares of RPL. RIL would issue 6.92 billion new shares, bringing its total equity capital to Rs 1,643 billion. Mukesh Ambani, Chairman and Managing Director of Reliance Industries Ltd, commented on the transaction, saying, “This merger follows Reliance Industries philosophy of creating enduring value for all our stakeholders.” It is a huge step towards our aim of becoming one of the world’s largest organisations.”

Merger Benefits and Synergies: The two together will unlock significant operational and financial synergies between RIL and RPL. It establishes a foundation for value-added growth and solidifies RIL’s position as a fully integrated global energy corporation. The merger will increase the value of both companies stockholders. RIL will benefit from the transaction in terms of EPS. RIL consolidates a world-class, complex refinery with minimum residual project risk, while expanding RIL’s product portfolio. There will be further benefits from lower operating expenses resulting from synergies of a merged enterprise. The merger is expected to reduce the earnings volatility for RPL shareholders and allows them to participate in the full energy value chain of RIL.

The merger will result in RIL:

  • Operating two of the world’s largest, most complex refineries
  • Owning 1.24 million barrels per day (MBPD) of crude processing capacity, the largest refining capacity at any single location in the world
  • Emerging as the world’s 5th largest producer of Polypropylene

Merger Details:
Under the terms of the proposed merger, RPL shareholders will receive 1 (one) share of RIL for every 16 (sixteen) RPL shares held by them. The appointed date of merger of RPL with RIL is 1st April 2008. RIL will cancel its holding in RPL.

Based on the recommended merger ratio, RIL will issue 6.92 crore new equity shares to the existing shareholders of RPL. This will result in a 4.4% increase in equity base from Rs 1,574 crore to Rs 1,643 crore. Consequently, the promoter holding in RIL will reduce from 49.0% to 47.0%

Advisors to the merger are as follows:

Valuation Advisors : Ernst & Young Pvt. Ltd. and Morgan Stanley India Co. Pvt. Ltd.
Transaction Advisors : JM Financial Consultants Pvt. Ltd. and Kotak Mahindra Capital Co Ltd.
Fairness Opinion : DSP Merrill Lynch Ltd. (for RIL) and Citigroup Global Markets India Pvt. Ltd (for RPL)
Legal Advisor : Amarchand & Mangaldas & Suresh A. Shroff & Co.
Tax Advisor : PriceWaterhouse and Coopers Pvt. Ltd.

The proposed merger is subject to all necessary approvals. All other procedural aspects of the proposed merger, and the timetable for implementation, will be communicated separately.

Reliance Industries Limited
Reliance Industries Limited (RIL) is India’s largest private sector company on all major financial parameters with a turnover of Rs. 1,39,269 crore (US$ 34.7 billion), cash profit of Rs. 25,205 crore (US$ 6.3 billion), net profit (excluding exceptional income) of Rs. 15,261 crore (US$ 3.8 billion) and net worth of Rs. 81,449 crore (US$ 20.3 billion) as of
March 31, 2008. RIL is the first private sector company from India to feature in the Fortune Global 500 list of ‘World’s Largest Corporations’ and ranks 103rd amongst the world’s Top 200 companies in terms of profits. RIL is amongst the 30 fastest climbers ranked by Fortune. RIL features in the Forbes Global list of the world’s 400 best big companies and in the FT Global 500 list of the world’s largest companies. RIL ranks amongst the ‘Worlds 25 Most Innovative Companies’ as per a list compiled by the US financial publication-Business Week in collaboration with the Boston Consulting Group.

Reliance Petroleum Limited
Reliance Petroleum Limited (RPL) is a subsidiary of Reliance Industries Limited. RPL is setting up a greenfield petroleum refinery and polypropylene plant in a Special Economic Zone at Jamnagar in Gujarat. With an annual crude processing capacity of 580,000 barrels per stream day (BPSD), RPL will be the sixth largest refinery in the world.

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