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In a second setback to its global acquisition plans in less than a month, Reliance Industries Limited, India's largest company by market capitalisation, has lost out on its $2-billion takeover bid for Calgary-based Value Creation.
RIL lost the deal to British energy major BP Canada, which has taken a controlling stake in Value Creation for around $1.2 billion. The debt-laden Value Creation has substantial reserves of the oil-rich sand deposits covering around 430 square miles.
An RIL spokesman declined to comment on the development. Value Creation said in a statement that BP would make "significant capital contributions" to the project and that the partnership with BP "blended a strong asset, world-class operator, high-calibre talents and market security, besides financial stability".
The company said it had received several solicited and unsolicited offers of interest from multiple parties, but the BP deal resolved the company's debt.
Just two weeks ago, Netherlands-based LyondellBasell Industries had rejected RIL's $14.5 billion bid. RIL had upped its offer price twice -- from $12 billion in November to $13.5 billion in January and then to $14.5 billion in February.
RIL had cash reserves of Rs 16,280 crore (Rs 162.8 billion) at the end of the last quarter. It had also raised Rs 9,330 crore (Rs 93.3 billion) since September 17 last year, from three tranches of treasury-stock sales.
Analysts, however, believe RIL quickly needs to deploy the cash it's sitting on. "If we discount the failed acquisitions, there's no major positive trigger for RIL going forward.
It's necessary for the company to deploy the cash now. They need a significant national or international discovery, as having cash with them is not positive for the stock," said a Mumbai-based analyst.
"They could look at assets in Brazil, Canada, West Asia and Russia," he added.
At the 35th AGM of RIL in November 2009, Mukesh Ambani said RIL had lined up aggressive plans for oil and gas exploration work over the next three years, as it seeks to strengthen its position in the energy business.
"The exploration and production business would give the company a much higher growth trajectory in the coming years," Ambani had said, adding that RIL plans an aggressive exploration campaign, investment in petrochemicals and overseas acquisitions as it prepares itself for the next phase of growth.
The RIL scrip was trading up at 3.80 per cent at Rs 1,066.80 on the Bombay Stock Exchange.
On the domestic front, RIL is working on developing nine gas fields around the Dhirubhai 1 and 3 gas discoveries in the Krishna-Godavari basin, which are currently producing around 45 million standard cubic meters per day or 40 per cent of India's total gas output.
