Issue No: 21
Moneta
Central
government
is
aggressively considering mergers
& acquisitions with the hope of
less
government,
Better
government. As per the latest
news the govt. is planning to have
more global-sized banks which
will reduce the 21 Public Sector
banks to just 12! Enthused by the
success of SBI merger, govt.
might introduce a 3 Tier structure
in the banking system. Same way
other sectors like oil & gas is also
going to be under hostile
takeovers or mergers.
July 2017
On 19th July, the Cabinet gave its
approval
to
ONGC
to
buy
Government's 51.11% stake in
HPCL. Post this merger, HPCL will
remain a subsidiary of ONGC and
this is expected to be completed in
one year.
The deal will be exempted from the
mandatory open offer when buying
more than 25% in a listed company.
(Which govt. had to follow during IBP
merger with IOCL) At the current
market price, ONGC would be
shelling out around Rs.28,000 to
30,000 Cr. for HPCL's stake and
after paying the premium, one-third
of Govt.'s divestment target of
Rs.72,500 Cr. will be met.
On paper, PSU bank mergers are
supposed to create the highest
value
for
shareholders
and
increase efficiencies. But, will
government be able to do the
same
practically?
Recent
announcements of M & A are PSU
banks & HPCL-ONGC deal. By
looking into each case separately,
Let’s see that are these mergers
going to create value or are they
are going to be lipstick on the pig!
Obviously, this is very good news for
ONGC, at least on the face of it
because it will become a fully
integrated oil company - right from
exploring crude oil to marketing;
upstream and downstream, all rolled
into one.
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