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Reliance echoes Anil’s formula

Mumbai, Aug. 5: All’s well that ends well. The bitter brawl between Brothers Ambani that spilled out of the boardroom last November ended today with the directors of Reliance Industries (RIL) approving the de-merger formula that Anil had unilaterally announced on Wednesday.

In an unusual late evening board meeting, the board of Reliance Industries, chaired by Mukesh Ambani, approved the de-merger of the company’s telecom, power and finance businesses, earmarked to go to Anil Ambani as part of the settlement that had been crafted by mother Kokilaben on June 18.

The only difference in Mukesh’s and Anil’s formulas was that the latter had missed a small step in the de-merger process, not that it was materially important.

“The board has approved the de-merger scheme,” RIL board member Y.P. Trivedi said after the meeting ended around 8 pm. Reliance officials, however, refused to reveal the details until the stock exchanges acknowledged receipt of the price sensitive information.

Trivedi had no such qualms. He told news agencies, “There is no significant change in the scheme.”

Once the green light came from the bourse authorities, RIL issued a press statement at 10 pm that said: “The board of directors of Reliance Industries Ltd (RIL) today unanimously approved the scheme of de-merger of the businesses of the company.”

Anil’s response to the RIL announcement was almost immediate: “I am delighted to welcome over 23 lakh Reliance shareholders to the ADA Enterprises family.

“I had publicly advocated that the reorganisation of the Reliance group should be based on the four pillars, namely, fairness, transparency, the need to unlock value, and to enhance value for over 23 lakh RIL shareholders, especially the small investors who have long been the bedrock of Reliance foundation.

“I am happy that the board of Reliance has accepted my position, and the proposed reorganisation of the Reliance group is based on the same philosophy. I look forward to building a sustained and mutually rewarding relationship with our enlarged family of investors, among the largest shareholding families in the world, with a focus on maximisation of overall shareholder value.”

The de-merged entities will end up with an investor base of 23 lakh shareholders each. However, the specified shareholders in RIL ' which includes the Petroleum Trust, Reliance Aromatics and Petrochemicals, and Reliance Energy and Project Development and Reliance Chemicals and Reliance Polyolefins ' who together hold 12.2 per cent of the RIL shareholding will not take any shares in the four SPVs. “RIL shareholders will get proportionate benefit of this also,” the statement said.

As a result, the total number of shares to be issued by each of the four companies would be 122 crore instead of 139 crore shares of RIL.

Shareholders of RIL, except the specified shareholders, would be issued shares of de-merged undertakings in a 1:1 ratio.

This means that for each share held in RIL, shareholders would get one share of Reliance Communications Ventures of Rs 5 each, one share of Reliance Energy Ventures of Rs 10 each, one share of Reliance Capital Ventures of face value Rs 10 each and one share of Global Fuel Management Services Limited with a face value of Rs 5.

The 100 shares of Reliance Energy Ventures would shrink to seven shares of Reliance Energy Limited once the SPV is merged with the operational entity. Similarly, 100 shares of Reliance Capital Ventures Ltd will be converted into five shares of Reliance Capital.

“The board at its meeting held on June 18, 2005 had resolved in principle to consider reorganisation of the businesses of the company and authorised the corporate governance and stakeholders' interface committee of directors (CG Committee) to examine in depth all the relevant issues, including statutory and legal requirements for a suitable reorganisation of the company's businesses and suggest a proposal to the board, including any scheme of de-merger,” the statement said.

On August 2, the board approved in-principle the proposal for demerger.

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