ESPLL Board Approves Scheme of Arrangement
The Board of Directors of Essar Shipping Ports & Logistics Ltd. (‘ESPLL’) at its meeting held on August 12, 2010 unanimously passed a resolution to demerge its shipping, logistics & oilfields businesses into a separate entity. This demerger will create two separate entities proposed to be named Essar Ports Ltd. (existing ESPLL) and Essar Shipping Ltd (‘Resulting Company’). The Resulting Company would also be listed on NSE and BSE. The Scheme also includes merger of two wholly owned investment subsidiaries into ESPLL. The Scheme of Arrangement as approved by the Board is subject to such approvals as may be required including that of Stock Exchanges, Lenders, Shareholders and High Court.
Scheme of Arrangement
The Board of Directors have approved the following Scheme of Arrangement:
Demerger of its Shipping, Logistics & Oilfields Services businesses is proposed to be undertaken through a Court approved Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956. The Appointed Date for the demerger is 1st October 2010.
Under the Scheme, ESPLL will transfer its Shipping, Logistics & Oilfields Services businesses to its existing wholly owned subsidiary (‘Resulting Company’). In consideration, Resulting Company will issue one equity share of Rs 10 face value each credited as fully paid-up to the shareholders of ESPLL for every three equity shares they hold in ESPLL as of the Record Date.
In addition, the Board has also approved a proposal for amalgamation of two of its wholly owned investment subsidiaries into ESPLL, for simplification of the holding structure. The Appointed Date for the merger is close of business on 30th September 2010.
Commenting on the rationale for the proposed restructuring, Mr. Shashi Ruia -Chairman, Essar Group added "Essar's experience in the shipping industry over the last 4 decades puts it in a position of leadership to create infrastructure that India needs today. As a part of this journey of asset creation in our shipping business, we made significant investments in the Ports business over the last 4 years which has made us the second largest private sector ports company in India. The Shipping vertical has been one of our group's initial investments from 1976 and remains key to our success. Our shareholders stand to benefit by the creation of these highly independent companies which will each add significant value over the coming years”
Ernst & Young has submitted a report on the share entitlement ratio, whilst IDFC Capital has provided a fairness opinion to the Board of ESPLL.
More From This Section
The Board has formed a Committee of Directors and authorized them to work along with the appointed advisors viz. Ernst & Young and Amarchand Mangaldas to finalize the relevant documents and file the same with regulatory authorities.
Benefits to the Shareholders
The shareholders of ESPLL would continue to participate in the growth and progress of Essar Ports, which is the second largest private sector ports company in India with an existing capacity of 76 MTPA being expanded to 158 MTPA by 2013.
In addition to that, they would receive separate shares in the Resulting company, which will allow them to participate individually as well as collectively in the growth areas of the Shipping, Logistics and Oilfield Services. The Resulting Company would also be the second largest private sector company in Shipping and Oilfields sector in India.
The shares of the Resulting Company will be listed on the Stock exchanges in India, wherein ESPLL shares are currently listed, thus providing liquidity to all the shareholders.
This will unlock value for all shareholders as they can participate directly in all the businesses that ESPLL has nurtured and brought to stature and create focused entities. Both the businesses are poised to chart their independent growth trajectory.
Ports business
The company has a port capacity of 76 MTPA, this includes 46 MTPA at Vadinar and 30 MTPA at Hazira, making it India’s second largest private sector port company. The company has a clear vision for ongoing and under development projects which will see our ports capacity reaching 158 MTPA by 2013. The company has committed Rs 8,200 crore (USD 1.8 billion) towards this business, of which Rs 4,600 crores (USD 1.0 billion) has already been invested
Most of the current capacity and a sizable portion of the proposed capacity is backed by long term take or pay contracts, this not only ensures sustained capacity utilisation, it also gives us a very good visibility of future earnings.
Shipping, Logistics & Oilfields Services businesses
ESPLL started the shipping business in 1976 and added the ports business over the last 5 years. Today, ESPLL is the second largest Shipping and Oilfields Services company in the private sector. The Ports, Shipping and Oilfield Services businesses have enjoyed synergistic growth under ESPLL for some years now.
The shipping business has a diversified fleet of 25 vessels including VLCCs, capesizes, Supramaxes, mini bulk carriers and tugs. The company has placed orders for 12 new ships, these are expected to join the fleet over next 24 months. A sizable part of the capacity is deployed on long term contracts and COAs, this insulates the company from the volatility of spot markets.
The Oilfields Services Business provides contract drilling services to Oil & Gas companies across the Globe. This business owns one semi submersible Rig and 12 land rigs. The company has ordered 2 new Jack up rigs, these will be joining the fleet over next 18 months
The logistics business provides end-to-end logistics services – from ships to ports, lighterage services to plants, intra-plant logistics and dispatching finished products to the final customer. This business owns transhipment assets to provide lighterage support services, onshore & offshore logistics services and manages a fleet of 4,200 trucks for inland transportation of steel and petroleum products
About Essar Group
The Essar Group is a multinational conglomerate and a leading player in the sectors of Steel, Oil & Gas, Power, Communications, Shipping Ports & Logistics, Projects and Minerals. With operations in more than 20 countries across five continents, the Group employs 60,000 people, with revenues of USD 15 billion. For more information, visit www.essar.com.