The boards have decided the swap ratio at 1:16, which implies that RPL shareholders will get one RIL share for every 16 shares held in RPL. RIL has decided to extinguish its treasury stock.

The merger ratio is slightly in favour of RPL, and RIL said the merger will be effective from April 1, 2008.

Commenting on the amalgamation, Reliance Industries Chairman and Managing Director Mukesh Ambani said, “The merger follows enduring philosophy of creating shareholder value.” He added the merger will be EPS accretive and that RIL will issue 6.92 crore shares to RPL shareholders.

Alok Agarwal CFO of RIL, speaking at a press conference, said the merger will unlock synergies in crude sourcing and product placement. He said the amalgamation will mitigate holding company discount.

Agarwal added the merger will also lead to greater flexibility in operations planning as integrated energy companies have higher valuations as against standalone refiners. Agarwal said gas assets and earnings potential will exceed 4.4% equity dilution. Promoter holding in RIL, he said, will come down to 47% from 49%.

The merged company, Agarwal added, will be able to use cash flow in a better manner. He said the company sees significant cash flow from RPL in the first year of operations. He also doesn’t see additional depreciation benefits from RPL.

Source : Moneycontrol