Question

Oil and Natural Gas Corporation (ONGC), the country’s largest oil and gas producer, today completed the acquisition of government-owned fuel retailer Hindustan Petroleum (HPCL) through an all cash deal worth Rs 36,915 crore, the company said in a Bombay Stock Exchange (BSE) filing today. The company had tied up Rs 35,000 crore with seven banks including three private and four public sector banks to fund the acquisition of Hindustan Petroleum (HPCL). While ONGC has secured loans for Rs 35,000 crore through banks, the details of funding the rest of the acquisition amount, Rs 1,915 crore, are not in public domain. "The transaction is in furtherance of the Government's objective to combine the various central public enterprises to give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders and create and 'Oil Major' which will be able to match the performance of international and domestic private sector oil and gas companies," ONGC said in a BSE filing. The company added that post acquisition the integrated oil company will be able to balance upstream and downstream pressures despite volatility in crude prices, will lead to lower earnings volatility, diversified cash flows and lower business risk resulting in higher PE multiples and valuations resulting in higher shareholder value. Postacquisition, HPCL will continue to operate as a separate listed entity with its board of directors and senior management separate from ONGC, Shashi Shanker, Chairman had told ETEnergyWorld earlier this month. The combined market value of ONGC and HPCL is estimated to be around Rs 3,11,925 crore, or $49 billion, comparable with Russian energy giant Rosneft's $61 billion. The board of ONGC had on 19 January approved the acquisition of the entire 51.11 per cent shareholding (778,845,375 equity shares) of the President of India, at a cash purchase consideration of Rs 473.97 per share. The company entered into the share purchase agreement with the President on 20 January. The acquisition of HPCL by ONGC has paved the way for the country’s first verticallyintegrated oil major. Finance Minister Arun Jaitley, in his budget speech last year, had announced the government’s plan to consolidate and integrate oil and gas Public Sector Undertakings (PSUs).

Question 1. Explain the different types of theories of mergers that were considered in the ONGC-HPCL saga

IN detail

20 marks quesrtion

NO SHORT ANSWER

Answer 1