MOSCOW (MRC) -- India's debt-laden Essar Group has confirmed that it has agreed to sell a 98% interest in its Essar Oil unit to a consortium led by Russia's Rosneft, giving the energy giant a gateway into the world's fastest growing fuel market, as per Reuters.
The deal will see Rosneft, along with its partners Trafigura and United Capital Partners (UCP), pay USD10.9 B for Essar's refining and retail assets. Separately, USD2 B will be paid toward the acquisition of the Vadinar port in the western state of Gujarat, along with certain import and export facilities.
Sources familiar with the matter had told Reuters on Friday that a deal was imminent.
It will give Rosneft a 49% stake in Essar Oil, with 49% being split equally between Trafigura and UCP. The deal was carefully structured to avoid falling foul of western sanctions against Russia over its role in the Ukraine crisis.
The deal helps Russia to deepen economic ties with India that stretch back to the Soviet era. The purchase is the biggest foreign acquisition ever in India and Russia's largest outbound deal, according to Thomson Reuters data.
It was finalized after Indian Prime Minister Narendra Modi and Russian President Vladimir Putin met at a summit in the western state of Goa on Saturday.
The all-cash deal will give Rosneft and its partners control of Essar's 20 MMtpy refinery in Gujarat, and its retail fuel outlets in India, where growth for refined petroleum goods in the next five years is expected to be in the 5% to 7% range.
"Rosneft is entering one of the most promising and fast-growing world markets," said its Chief Executive Igor Sechin in a statement, adding that the deal gives it "unique opportunities for synergies" with its existing assets.
Separately, Rosneft said it would use Venezuelan crude to supply the Vadinar refinery.
The closing of the transaction is conditional on receiving requisite regulatory approvals that are expected before the end of Q1 of 2017.
The deal also reduces some of the pressure on Essar, which is controlled by the billionaire Ruia brothers. The group has a presence in oil and gas, steel, ports and power, and has been under pressure from its lenders to reduce its debt burden.
As MRC reported before, in July 2015, Russian oil major Rosneft signed a preliminary agreement with the Essar group, controlled by the Ruias, to buy a 49% stake in Essar Oil’s Vadinar refinery and supply 100 million tonnes of oil to the latter for the next 10 years.
Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time. Apart from other assets, Rosneft owns Angarsk Polymer Plant in Russia and Lisichansky refinery in Ukraine.
MRC