London’s listing regime was thrown into the spotlight today as investors reacted with outrage to the low-ball bid by Essar Energy’s biggest shareholder seeking to take the Indian oil refiner private after a disastrous three-year spell as a public company.
The billionaire Ruia family’s offer of £900 million or 70p a share — one-sixth of the 420p float price — 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 its London listing four years ago, spearheaded by JP Morgan Cazenove and Deutsche Bank. Today it added 1.1p to 67.1p but languished below the offer price. Short-sellers also moved into the company last November, betting on further price declines.
The Financial Conduct Authority refused to comment directly on Essar today, but pointed out that reforms to listing rules were designed to offer more protection to minority shareholders, with the debacle over 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, broke cover to label brothers Ravi and Shashi Ruia’s bid “an example of cynical opportunism” while other fund managers were equally scathing in private. Many — like Scottish Widows — 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.”
Another shareholder governance body said: “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.”