Rosneft, Trafigura to acquire 98% of Essar Oil for $13 billion

Essar Group, controlled by India’s billionaire Ruia brothers, signed binding agreements to sell a combined 98 percent stake in its refinery unit to Russian energy giant Rosneft PJSC and a consortium of Trafigura and United Capital Partners.

The Indian conglomerate agreed to sell 49 percent each of Essar Oil Ltd. to Rosneft and the consortium for an enterprise value of 728 billion rupees ($10.9 billion), Essar said in a statement on Saturday. The equity valuation will be about $5.8 billion, the price at which the company was delisted, Essar Group director Prashant Ruia told reporters at a briefing in Goa, India.

Equity value about $5.8 billion; approvals seen by year-end.

The all-cash deal includes Essar’s Vadinar refinery, port.

The all-cash deal includes India’s second-largest refinery at Vadinar, and another $2 billion will be paid for a port terminal that helps feed the refinery. All approvals are expected by the end of this year and most of the proceeds will go to retire debt, Ruia said.

Russia has been deepening energy ties with India, which is expected to surpass Japan as the world’s third-largest oil user this year to become the fastest-growing crude consumer through 2040, according to International Energy Agency estimates. India’s state-owned energy companies are investing $5.5 billion to buy stakes in Rosneft’s Vankor and Taas-Yuryakh fields.

Essar Energy Holdings Ltd. and Oil Bidco (Mauritius) Ltd. — which control Essar Oil –have signed separate agreements for the 98 percent stake sale

The first outlines the sale of 49 percent to Petrol Complex Pte., a unit of Rosneft

The second sees the remaining 49 percent sold to Kesani Enterprises Co. — owned by a consortium led by Trafigura and United Capital Partners

Russia’s VTB Bank PJSC will lend Essar $3.9 billion to restructure debt, Andrey Kostin, VTB chief executive, told reporters on the sidelines of a separate briefing in Goa

Rosneft itself will pay about $3.5 billion for the Essar deal, Kostin said

Rosneft and Essar had signed a non-binding pact on the deal in July 2015. Rosneft had also signed a pact to supply Essar Oil about 200,000 barrels of crude per day over 10 years.

Conclusion of the sale would help Essar Group generate funds to repay lenders after it loaded up on debt to fund an $18 billion spending spree.

Essar Oil runs the Vadinar refinery in the western state of Gujarat, which can process about 400,000 barrels a day. Most of the refinery’s output is sold locally, either through its own outlets or to government-owned fuel retailers.

Source: Bloomberg