(Adds VTB, Rosneft comments)
By Douglas Busvine and Denis Pinchuk
GOA, India Oct 15 India's debt-laden Essar
Group confirmed on Saturday that it has agreed to sell a 98
percent interest in its Essar Oil unit to a consortium led by
Russia's Rosneft, giving the energy giant a gateway
into the world's fastest growing fuel market.
The deal will see Rosneft, along with its partners Trafigura
and United Capital Partners (UCP), pay $10.9 billion for Essar's
refining and retail assets. Separately, $2 billion will be paid
toward the acquisition of the Vadinar port in the western state
of Gujarat, along with certain import and export facilities.
Sources familiar with the matter had told Reuters on Friday
that a deal was imminent.
It will give Rosneft a 49 percent stake in Essar Oil, with
49 percent being split equally between Trafigura and UCP. The
deal was carefully structured to avoid falling foul of western
sanctions against Russia over its role in the Ukraine crisis.
"Rosneft will not get a controlling stake, partly because of
these reasons (sanctions)", Andrey Kostin, head of Russian
lender VTB which advised Essar on the deal, told
The deal helps Russia to deepen economic ties with India
that stretch back to the Soviet era. The purchase is the biggest
foreign acquisition ever in India and Russia's largest outbound
deal, according to Thomson Reuters data.
It was finalised after Indian Prime Minister Narendra Modi
and Russian President Vladimir Putin met at a summit in the
western state of Goa on Saturday.
The all-cash deal will give Rosneft and its partners control
of Essar's 20 million tonne refinery in Gujarat, and its retail
fuel outlets in India, where growth for refined petroleum goods
in the next five years is expected to be in the 5 percent to 7
"Rosneft is entering one of the most promising and
fast-growing world markets," said its Chief Executive Igor
Sechin in a statement, adding that the deal gives it "unique
opportunities for synergies" with its existing assets.
Separately, Rosneft said it would use Venezuelan crude to
supply the Vadinar refinery.
The closing of the transaction is conditional on receiving
requisite regulatory approvals that are expected before the end
of the first quarter of 2017.
The deal also reduces some of the pressure on Essar, which
is controlled by the billionaire Ruia brothers. The group has a
presence in oil and gas, steel, ports and power, and has been
under pressure from its lenders to reduce its debt
In parallel with the deal, Russian lender VTB said
on Saturday it would lend Essar about $3.9 billion toward debt
Chanda Kochhar, chief executive of ICICI Bank Ltd
- one of Essar's top lenders - welcomed the deal, noting that it
has been working closely with Essar to deleverage its stressed
(Writing by Euan Rocha and Jack Stubbs; Editing by Clarence
Fernandez and Andrew Bolton)