Mukesh may leverage Reliance share trust for $22-billion global buyout
12 Mar 2007
Mumbai: Mukesh Ambani is getting set for a mega acquisition that could cost anywhere between $22 billion and $30 billion (Rs100,000 crore and Rs136,000 crore), that will take Relance Industries to the global league.
Ambani is likely to team up with some of the major private equity funds like Blackstone, KKR and Carlyle for the mega buyout. A global-scale acquisition amidst its huge existing investments needs financial backing of an enviable scale. Hence the arrangement with a private equity investor.
The Reliance board, meanwhile, met a second time in less than a fortnight to take stock and target acquisitions. Ambani, it seems, has set his sights on some of the world's top companies like $54-billion US petrochemical giant Dow Chemical and some other global majors.
Reliance is eyeing an entry into the wider global market through such an acquisition - a mega buy that would give it easier access to global markets and cutting-edge technology.
Dow Chemical is a leader in specialty chemicals, which account for over one third of the global giant's annual business. Dow is also a leader in plastics. With Dow, RIL would also have a permanent customer for its low-cost intermediate and raw materials, which can be turned into high-value products overseas.
The Reliance share trust has 12 per cent of RIL shares, which at a price of Rs1,320 per share is worth Rs27,000 crore. The shares were placed in the trust created at the time of Reliance Petrochemicals' merger with RIL in 2000. The trust will see another 2 per cent addition of shares during the merger of IPCL with RIL.
Ambani may park the 14-per cent equity in a special purpose vehicle (SPV) and bring in a partner who will invest an equal amount of money. This SPV can then be used to raise another Rs50,000 crore in debt, taking the total corpus to over Rs100,000 crore.
Sources say that Ambani is keen not to place a strain on RIL even as it pursues high growth. He is already handling three mega projects — a Rs25,000 crore, 33-million tonne refinery at Jamnagar; a Rs50,000-crore retail dream; and three special economic zones - involving investments of over Rs50,000 crore.