Anger at low-ball bid for Essar Energy

Billionaire Ruia brothers accused of 'cynical opportunism' over £900m offer, while move triggers calls to give minority shareholders more protection

City investors have expressed their anger at a low-ball bid by Essar Energy's largest shareholder to take the Indian oil refiner private following a disastrous four-year spell as a public company.

The billionaire Ruia family's offer of £900m – or 70p a share – for the 22 per cent of the company that they do not already own has triggered calls for more protection for minority shareholders.

The stock has declined steadily since listing at 420p-a-share four years ago, spearheaded by JP Morgan Cazenove and Deutsche Bank.

Yesterday it added 2.15p, or 3.26 per cent, to 68.15p, but languished below the offer price. Short-sellers moved into the company last November, betting on further price declines.

The Financial Conduct Authority (FCA) refused to comment directly on Essar, but pointed out that reforms to listing rules were designed to offer more protection to minority shareholders, with the debacle over the Kazakh miner ENRC – also taken private, again by majority shareholders – still fresh in the memory.

"The new rules will give shareholders in premium listed companies additional voting rights and greater influence over key decisions," an FCA spokesman said. "By safeguarding minority interests from abuse by controlling shareholders, the changes will promote market integrity and empower minority shareholders to hold the companies they invest in to account."

David Cumming, head of equities at Standard Life Investments, called the bid by the brothers Ravi and Shashi Ruia "an example of cynical opportunism", while other fund managers were equally scathing in private. Many had been forced to buy into the company for tracker funds although their stock pickers have steered clear of the business.

A source at one leading fund manager said: "We have not held an active position in Essar precisely because of the governance concerns that are now coming home to roost."

A shareholder governance body added: "In cases where there is a majority shareholder there needs to be a relationship agreement between the shareholder and the company. The FCA's powers also only extend to the company – if anything they need direct recourse against the majority shareholders themselves. If you go above 30 per cent you have to offer the other shareholders the highest price you paid for the shares. Above 50 per cent you can do what you want."

Essar Energy, which owns a series of power and oil assets in India and operates the UK's second-biggest oil refinery, Stanlow in north-west England, said there was no certainty that a formal offer for the company would be made.

Sources close to the Ruia family defended their decision to float the business in 2010, arguing that the shares had been hit by factors outside their control. These included a fall in growth expectations in India and an unexpected tax ruling in 2012 which meant that Essar was not entitled to defer tax payments of $1.78bn (£1bn).

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future