Rosneft, Trafigura-UCP consortium announce acquisition of Essar Oil for $12.9 billion

Russian oil major Rosneft, along with a consortium comprising Trafigura and UCP, on Monday announced completion of a USD 12.9 billion deal to acquire private refiner Essar Oil, strengthening ties between the world's largest oil producer and the fastest growing fuel consumer.

Rosneft will get a 49.13 percent stake in Essar and the Trafigura-UCP consortium (via Kesani Enterprises Company Limited) will get another 49.13 percent stake. The remaining 1.74 percent stake will be held by retail shareholders, Essar said in a press release.

"For Essar, the closure of this landmark transaction ushers in a new phase of growth across our portfolio of businesses that hold great promise in India’s enduring development story,” Essar Founder Shashi Ruia said.

The deal has helped Essar de-leverage its portfolio substantially and reduced debt by over Rs 70,000 crore, Ruia said in a press conference.

From the deal, USD 3.5 billion will come to India. Rs 4,000 crore of the deal will be used to pay debt from Indian banks, LIC and insurance companies, he added.

Shareholders, who did not participate in delisting process will get shares in the holding company.

The deal includes Essar Oil's 20 MTPA,  400,000 barrel-per-day oil refinery in Vadinar, its pan-India network of over 3,500 retail outlets and the associated refinery infrastructure.

It also includes the Vadinar Port, which has capacity of 58 million tonnes and the Vadinar plant - a 1,010 MW state-of-the art, multi-fuel unit that supplies both power and steam to the Vadinar refinery.

The consortium has picked up a former trading veteran from its shareholder BP to run Indian operations.

Tony Fountain, who was chief executive for refining and marketing at Indian conglomerate Reliance Industries Ltd from January 2012 to February 2016, will be non-executive chairman of the merged entity, three sources said. Fountain did not comment on his appointment.

The deal helps Russia to deepen economic ties that stretch back to the Soviet era. The deal, initiated about two years ago, will help Rosneft in gaining access to India's rising fuel retail market.

Rosneft and Trafigura are the latest international companies after Royal Dutch Shell and BP to enter the Indian fuel retailing market.

Rosneft may supply Venezuelan oil to Essar's Vadinar refinery after a deal to buy a stake in the Indian company is finalised, the Indian company's managing director LK Gupta told Reuters in August last year.

(With inputs from Reuters)