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Some of the Indian banks that have lent to refiner Essar Oil have not yet approved its acquisition by a group of companies led by Russia’s Rosneft, and the deal has been postponed for next month, Essar and Rosneft said as quoted by Reuters. Originally, the $13-billion acquisition was scheduled to close this month.
The deal was first announced last October. Under its terms, Rosneft would buy 98 percent in the Indian refiner together with commodity trader Trafigura and Russian investment fund United Capital partners.
Rosneft will get 49 percent of Essar and the other 49 percent will be divided between the other two partners. However, the deal needs clearance from 28 Indian banks where Essar has credit lines, and some of these have not yet signed off on the deal, a source told Reuters.
The acquisition will give the Russian giant and Trafigura access to one of India’s biggest refineries, Vadinar, with a daily throughput of 400,000 barrels of crude, along with a gas station network of 2,470 outlets across India. It is the biggest purchase of an Indian company by a foreign buyer.
Rosneft first made public its plan to buy into Essar last March, when the parties agreed that the Russian company would deliver crude to the Vadinar refinery. Back then, both sides expected to sign and close the transaction by June.
In August, however, Indian media reported that the sale may have run afoul of the U.S., which has Rosneft on the list of sanctions it had imposed over Russia’s annexation of Crimea. Essar Oil’s owners, the Ruia brothers, had initially sought to sell 74 percent to Rosneft, but reduced the share to 49 percent to avoid the company being categorized as a subsidiary of a group that has U.S. sanctions imposed.
Russia’s VTB bank, which is taking part in the financing of the deal, said it hoped the deal will be closed soon, adding that after its finalization, another 19 days will be necessary to settle the payments.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.