India's Essar agrees to sell oil arm to Rosneft-led group
(Reuters) India's debt-laden Essar Group confirmed on Saturday that it has agreed to sell a 98% interest in its Essar Oil unit to a consortium led by Russia's Rosneft, giving the energy giant a gateway into the world's fastest growing fuel market.
The deal will see Rosneft, along with its partners Trafigura and United Capital Partners (UCP), pay $10.9 B for Essar's refining and retail assets. Separately, $2 B will be paid toward the acquisition of the Vadinar port in the western state of Gujarat, along with certain import and export facilities.
Sources familiar with the matter had told Reuters on Friday that a deal was imminent.
It will give Rosneft a 49% stake in Essar Oil, with 49% being split equally between Trafigura and UCP. The deal was carefully structured to avoid falling foul of western sanctions against Russia over its role in the Ukraine crisis.
The deal helps Russia to deepen economic ties with India that stretch back to the Soviet era. The purchase is the biggest foreign acquisition ever in India and Russia's largest outbound deal, according to Thomson Reuters data.
It was finalized after Indian Prime Minister Narendra Modi and Russian President Vladimir Putin met at a summit in the western state of Goa on Saturday.
The all-cash deal will give Rosneft and its partners control of Essar's 20 MMtpy refinery in Gujarat, and its retail fuel outlets in India, where growth for refined petroleum goods in the next five years is expected to be in the 5% to 7% range.
"Rosneft is entering one of the most promising and fast-growing world markets," said its Chief Executive Igor Sechin in a statement, adding that the deal gives it "unique opportunities for synergies" with its existing assets.
Separately, Rosneft said it would use Venezuelan crude to supply the Vadinar refinery.
The closing of the transaction is conditional on receiving requisite regulatory approvals that are expected before the end of Q1 of 2017.
The deal also reduces some of the pressure on Essar, which is controlled by the billionaire Ruia brothers. The group has a presence in oil and gas, steel, ports and power, and has been under pressure from its lenders to reduce its debt burden.
In parallel with the deal, Russian lender VTB said on Saturday it would lend Essar about $3.9 B toward debt reconstruction.
Chanda Kochhar, chief executive of ICICI Bank Ltd., one of Essar's top lenders, welcomed the deal, noting that it has been working closely with Essar to deleverage its stressed balance sheet.
Reporting by Douglas Busvine and Denis Pinchuk; Writing by Euan Rocha and Jack Stubbs; Editing by Clarence Fernandez and Andrew Bolton
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