Source: Financial Times, April 09,2012
The Spanish utility Gas Natural Fenosa is considering a bid for BG Group’s stake in India’s Gujarat Gas, two people with knowledge of the matter said, in a deal reported to be valued at up to $900m.
Any offer would put the Spanish company up against a consortium of Indian public sector utilities, including Oil and Natural Gas Corporation, Bharat Petroleum and Gujarat State Petroleum Corporation.
The consortium was the only formal bidder for a 65 per cent stake in India’s largest private sector gas distribution company, in a bidding process that officially ended last month.
However, the UK-based oil and gas producer is understood to have been dissatisfied with the bid discussions so far. Both BG Group and GNF refused to comment on the issue.
“The bids didn’t meet financial expectations for BG,” Kaustav Mukherjee, a partner at Boston Consulting Group in Mumbai, said. “There was a misalignment between what BG expected and how the market valued it.”
Analysts say BG Group expects the final bidder to pay a $200m premium over the current market price of $700m, bringing the value of its stake up to $900m. But muted market sentiment may have contributed to the low number and value of bids.
“The discounted bid [from the Indian consortium] may have been related to the fact that markets are depressed from the perspective of access to finance, whereas others may not have seen the intrinsic value of the asset given the market conditions,” said Arvind Mahajan, head of energy at KPMG India.
A spokesman for one of the bidding public sector companies, who spoke on condition of not being directly identified, confirmed the Indian consortium continued to be interested in the deal.
“We have placed our bid collectively . . . if we’re going in aggressively as a group, we intend to see it through,” the spokesman said.
Gujarat Gas, with its expansive pipeline distribution network, would provide a foothold for a gas company to establish or expand its presence in India.
“It’s in a highly industrialized state with lots of petrochemical plants and other industry already established there,” Mr Mahajan said. “And it gives the acquiring company direct access to a large, existing customer network and to high growth, be it in the industrial, commercial or retail segments.”
BG Group is looking to offload its holdings in Gujarat Gas as part of a global restructuring that will see it refocus on production and supply of liquified natural gas in other emerging economies s