Acquisition of Ipcl by Reliance

Acquisition of IPCL by Reliance

The expected had happened unexpectedly. While everyone expected Reliance to bid

for IPCL aggressively, but what an aggression!!

The results of the bid, for 26%of equity, announced on 18th May 2002, were:

Rupees/share

Reliance Industries Ltd (RIL) 231

Indian Oil Corp (IOC) 131

Nirma 110

The bid price was at a 74% premium to IPCL’s last traded price.

There were wide spread speculations on why Reliance bid was so higher than the other

bidders.

One newspaper had the explanation :

"Market circles are still struggling to come to terms with the surprise of Reliance bidding so

aggressively for IPCL. The bid - more than twice the reserve price when the rivals were under it -

is certainly not characteristic of RIL, which has established a reputation as a conservative bidder,

whether in privatisation deals or in telecom licenses. So what explains the exception? The RIL

grapevine has it that after the consultants had submitted their valuation of IPCL, the two brothers

decided to add on a premium to play safe. The patriarch then intervened to add on a further

premium. This one, he apparently observed, was as a mark of gratitude to the Disinvestment

Minister for not putting a spanner in the works despite a history of hostility between Shourie and

RIL dating back to the eighties."

Mr. Arun Shourie, Minister of Divestment, had something interesting to say :

"During the privatisation of IPCL my ministry came under a lot of pressure to prevent Reliance

from bidding for it. There were attempts to disqualify the group from the bidding process, to the

extent that the entire disinvestment process came to halt. But I went by the Government policy

which clearly specifies that if the bidder fulfils all the norms, he will be eligible," the minister said.