Essar directors shun investor’s offer as too low
ESSAR Energy’s independent directors have rejected a plan from the firm’s biggest investor to take the company private, saying the 70p offer price “clearly undervalues the company and its prospects”.
The board members with no links to the Ruia family’s Essar Global Fund (EGF) unanimously shunned the proposal yesterday.
EGF owns 78.02 per cent of Essar and has made an approach to take over the remaining shares in the FTSE 250-listed firm rather than sell down the stake to comply with London’s free float requirement of 25 per cent.
“The independent committee is fully committed to safeguarding the interests of minority shareholders,” said Philip Aiken, chairman of the committee of independent directors.
Several institutional shareholders including Standard Life have spoken out against the “opportunistic” takeover approach.
The directors said yesterday they have brought in advisers from Greenhill to help defend the firm from EGF’s advances, bolstering a team that already includes bankers from JP Morgan.
FTSE has allowed the company to stay part of its indices while EGF mulls a firm offer.
Essar had been facing ejection from the indices next month for falling short of the free float rules, which would have led to tracker funds dumping the stock and putting further pressure on other investors.
Shares in Essar Energy closed up nearly four per cent, as investors bought into the prospect of an improved offer from EGF. The firm floated at 420p in 2010.
ADVISERS ESSAR’S TAKEOVER APPROACH
JAMES LUPTON
GREENHILL
The committee of independent directors at Essar Energy yesterday instructed the independent investment bank Greenhill to advise it on its next moves.
Under guidelines set out by the Association of British Insurers (ABI), non-executive directors are expected to seek separate, independent advice on the merits of a proposed transaction, with the adviser being paid on a fixed fee basis. Up until yesterday the group’s independent directors were taking advice from JP Morgan, the bank that masterminded the original flotation. JP Morgan stays in place with Greenhill.
The Greenhill team is led by James Lupton, the veteran City banker who co-founded the bank’s London arm in 1998 with Simon Borrows, who is now chief executive of 3i. Lupton was at Baring Bank when it was brought down by the rogue trader Nick Leeson in 1995.
As well as being a deal-maker, Lupton is co-treasurer of the Conservative party.
The team also includes Anthony Parsons, who joined Greenhill in 2012. Prior to joining Greenhill, Parsons was at Deutsche Bank where he had a number of senior roles including head of UK M&A.