London: More than 90 per cent of Imperial Energy investors accepted a 1.3 billion pounds ($1.88 billion) takeover bid from Indian oil company ONGC, meeting a key condition for the deal to proceed, sources close to the matter said on Tuesday.
Imperial investors, bankers and analysts believed ONGC would back out of the deal -- which was agreed when crude traded at around $130 a barrel, compared with less than $40 now -- if its condition of 90 per cent acceptance was not met.
Shareholders in the Russia-focussed oil explorer had until 1300 GMT Tuesday to accept ONGC's offer. "They have exceeded the 90 per cent threshold comfortably," one source said. State-backed ONGC tried unsuccessfully to delay the bid, and Indian media said the Delhi government wanted ONGC to renegotiate the deal price to reflect the drop in oil prices.
The takeover is part of ONGC's drive to secure energy resources to power India's economy, which has been booming in recent years.
Imperial shares closed up 17 per cent at 1,205 pence as investors grew more optimistic the deal would proceed, but still ended short of ONGC's offer of 1,250 pence per share.
RBC Capital Markets predicted last week that if the deal were to collapse, the shares would fall to between 270 and 500 pence, based on the recent share performance of other exploration companies operating in the former Soviet Union.
One Imperial investor said ONGC could yet seek to wriggle out of the deal, possibly by invoking a "material adverse change" (MAC) clause. "I really hope that this is a done deal now, but given what we've seen so far I not sure this is over yet," the investor said.
A MAC clause allows an acquirer to pull out of a deal should a material change damage the target's business. ONGC could claim the oil price drop constituted a material adverse change. MAC clauses are common in takeover documentation but are rarely invoked. The best-known recent case in the UK was the 2001 attempt by advertising group WPP to back out of a deal to acquire media buyer Tempus, citing a likely negative impact on Tempus' business from the Sept. 11 attacks in New York.
The takeover regulator denied WPP's attempt and the takeover proceeded. ONGC must make a statement on the level of acceptances by Wednesday, the sources close to the matter said. ONGC Videsh, the ONGC unit that is making the bid, declined comment, as did Imperial.
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