In a blow to the Ruia family’s attempt to bring London-listed Essar Energy back into private hands, the company on Monday announced that a committee set up to examine a buyout proposal had unanimously concluded that the plan undervalued the company.
“The independent committee is unanimous in concluding that the current proposal from Essar Global Fund Ltd (EGFL) clearly undervalues the company and its long-term growth prospects,” said Philip Aiken, chair of the five-person independent committee set up following EGFL’s proposal to offer 70 pence a share and 80 pence for the company’s convertible bonds.
A formal offer is yet to be made. The committee made its decision at a meeting on Friday, following consultations with stakeholders.
“The Independent Committee is fully committed to safeguarding the interests of minority shareholders,” he added.
The company has also roped in Greenhill & Co as an independent adviser in the process, alongside JP Morgan Cazenove. The committee’s decision follows an outcry from minority investors in the company in which EGFL holds a 78.02 per cent stake. Last week one of the larger minority shareholders, Standard Life Investments, branded the proposal “cynical opportunism” and a “calculated attempt” to deprive minority shareholders of a future upside in the company. Observers have also been quick to point to ENRC, a Kazakh miner taken private last year, despite an independent committee determining that the offer undervalued the company after 80 per cent of investors backed the deal.
Shares dip Shares of Essar slipped in early afternoon trading in London to around 64 pence, below the 66 pence closing price on February 14, when news of the proposed takeover was announced. The shares were floated at 420 pence in May 2010.
Under UK takeover rules, EGFL now has until 5 p.m. on March 14 to make a formal proposal to Essar Energy’s board to buy out the 22 per cent it does not already own. If it does not meet that deadline, then it will be unable to make another bid for the company for at least a further six months.
One potential complication has been removed, though.
According to recent changes to FTSE Group listing regulations, Essar Energy had until March 4 to raise the free float from 22 per cent to 25 per cent or be removed from the FTSE indices, requiring a number of shareholders to sell.
However, last week the FTSE group announced it was removing this requirement until the outcome of the takeover discussions is known.