MUMBAI: Spanish utility Gas Natural Fenosa is in talks with BG Group Plc to buy the UK oil and gas company’s 65 percent stake in India’s Gujarat Gas, a source with direct knowledge of the matter said on Sunday, in a deal valued at about $900 million.
A three-member consortium of state-run Oil and Natural Gas Corp, Bharat Petroleum Corp Ltd and Gujarat State Petroleum Corp (GSPC) is the only other bidder in talks on buying BG’s stake.
The Indian unit of BG, which announced its intention to sell its stake in Gujarat Gas last November, hopes to finalise the deal with either of the two bidders by early May, the source told Reuters, declining to be identified as he is not authorised to speak to the media.
Germany’s biggest utility, E.ON AG, UK-based private equity firm Actis, and India’s Adani group and Torrent group had been among the initial bidders for the BG stake, but dropped out given stiff valuations.
While the Spanish utility is likely to have bid close to the market price, the Indian consortium has valued the stake at a discount, the source said.
BG’s 65 percent stake in Gujarat Gas is valued at about $700 million at the current market price. The company acquiring the BG holding will have to make a mandatory open offer for an additional stake, valuing the total deal at about $900 million.
Shares in Gujarat Gas, which has a market value of about $1 billion, ended at 403.05 rupees on Friday.
Officials at BG and Gas Natural were not immediately available for comment.
The Spanish utility has a wide presence in Europe and North Africa and has been looking to expand internationally, mostly inLatin America. It currently has no presence in India.
Gujarat Gas, set up in 1980, supplies piped gas to 317,000 domestic and industrial customers and compressed natural gas to 144,000 users, mostly across Surat, Bharuch and Valsad in the western state of Gujarat.
The company also operates a 3,700-km (2,300-mile) gas pipeline network.
BG, which acquired control of the western India-focused gas distribution company in 1997, is keen to sell its stake in Gujarat Gas as part of restructuring its asset portfolio. Globally, BG Group focuses on exploration and production activities and liquefied natural gas.
India’s current gas demand of 166 million cubic metres a day (mmscmd) is projected to rise to 443 mmscmd by 2017, due to the growing number of power plants, industries and vehicles in Asia’s third-largest economy.