After raising £1.2bn in 2010 from having floated a 23.2 per cent stake in Essar Energy (ESSR) at 420p a share, India's billionaire Ruia brothers have now made an indicative offer to buy those shares back. The trouble is that they're offering to pay just 70p a share - and that has infuriated some minority shareholders, with institutional shareholder Standard Life reported to have condemned the bid as "an example of cynical opportunism". Moreover, following other recent situations where minority shareholders have been apparently disadvantaged - such as at Bumi and Eurasian Natural Resources Corporation - the move could reignite the debate over the London Stock Exchange's listing regime.
The flotation was originally pitched as a means of allowing investors exposure to India's growth story through Essar's complex of coal-fired power plants and oil refineries. But subsequent regulatory delays, a stuttering Indian economy and a steep fall in the rupee have combined to reduce Essar's initial market value from £5.4bn to the current £860m. The Ruia brothers now have 28 days in which to table a firm bid. That could take the form of an offer that would require simple majority support, or a scheme of arrangement that would need 75 per cent of shareholders to vote in favour of the deal. Either way, as they already own 78.02 per cent of the shares, the brothers have the numbers to succeed. They have also offered 80¢ (48p) for each 4.25 per cent convertible bond.
