RIL RPL Merger Details Study

The merger between Reliance Industries and Reliance Petroleum will give the benefit of combined operating profitability to the merged entity, while tax benefits through depreciation would be minimal as the two units will maintain independent accounts. Board of Reliance Industries Ltd (RIL) and Reliance Petroleum Ltd (RPL) are meeting on 2nd March 2009 to consider and recommend amalgamation of RPL with RIL.
1) Merger is likely to be effective from 1st April, 2009:
2) This merger is mainly to achieve scale and operational synergy:
3) This merger is not to avail any tax benefits of RPL as this will be tax-neutral:
4) Some section of the media is arguing that merger is mooted with a view to set-off the expected losses of RPL having arisen on inventory.
5) The merger ratio is likely to be loaded in favour in RIL than RPL:
6) RIL will buy 5% stake of Chevron, being 22.5 crore shares, at Rs. 60 per share, for Rs. 1,350 crores. Due to this, RIL holding in RPL will rise to 75.38%.
Swap ratio is likely to be 1:22 of RIL to RPL, considering extinguishment of RIL stake in RPL. If stake is not extinguished, swap ratio could be 1:20.
Based on the closing market price of 27th February, the swap ratio works out at 1:17:
RIL is likely to have a networth of Rs. 1,09,000 crore as at 31st March 2009:
thanks ril rpl, business standard, moneycontrol, ril, rpl
The merger between RIL and RPL will bring down the shareholding of promoters in the combined entity to 47% from 49%, while the retail shareholding will go up to 19% from 16.1%.
The RIL board which approved the merger on Monday, said it will issue 6.92 crore equity shares to RPL shareholders, which will increase the equity capital to Rs 1,643 crore. “The merger will reduce the earning volatility of RPL shareholders and allow them to participate in the full energy value chain of RIL,” reports ET.