Mumbai, July 4: Anil Ambani firms Reliance Natural Resources Limited and Reliance Power will merge in a Rs 50,000-crore ($11 billion) all-stock deal, with shareholders of RNRL getting one share of Reliance Power for every four held by them.

The boards of the two companies today approved the merger terms; the 4:1 share-swap ratio is on the basis of a valuation done by KPMG and is in line with market expectations.

On Friday, both the companies had informed the stock exchanges about the merger plan.

RNRL shareholders, including the promoters, would get RPower shares worth about Rs 7,150 crore, on the basis of current market prices. Out of these, promoters will get shares worth over Rs 3,600 crore, according to PTI.

Analysts said the merger was a fallout of the Supreme Court verdict on May 7 when RNRL lost the battle with Mukesh Ambani’s Reliance Industries Ltd over the supply of gas from the latter’s Krishna Godavari basin.

A three-judge bench, headed by Chief Justice K.G. Balakrishnan, had then ruled that the government had absolute powers to fix price, quantity and tenure of gas supply. The apex court had said any sale by a private contractor (RIL) to another party (RNRL) had to be within the parameters laid down by the government.

The Supreme Court verdict — which upheld the government’s position that gas could only be sold to an end- user — had raised serious questions about the rationale for RNRL’s existence.

Counting gains

The companies made a joint statement today that justified the merger saying that RPower and its shareholders, including Reliance Infrastructure Ltd, will benefit.

RNRL’s master agreements on gas supply with RIL will facilitate RPower’s plans to generate 8,000 mega watts of electricity. Besides, gas from RNRL’s four coal bed methane blocks, with an estimated reserve of about 193 billion cubic metres, and its 10 per cent stake in an oil and gas block in Mizoram will also benefit the merged entity.

Shareholders of RNRL are expected to benefit by participating in the future growth prospects of RPower’s diversified generation portfolio.

Speaking to The Telegraph, an analyst said the merger would be more beneficial to RNRL. “For an entity saddled with concerns about its business model and the fear that it would turn into a shell company, the merger is certainly good for its shareholders as they will now be a part of a company in the power business,’’ he said.

RPower and its subsidiaries have almost 35,000MW generation capacity, both operational as well as under development, besides coal reserves in India and abroad. The analyst said RPower would get better access to gas because of the merger. Following the merger, which is subject to approvals of the shareholders, stock exchanges and Bombay High Court, RPower will have over six million shareholders.