Gas Natural Fenosa in talks to buy BG Group's stake in Gujarat Gas: report

Spanish natural gas utilities company  Gas Natural Fenosa is in talks to buy BG Group Plc's 65 per cent stake in Gujarat Gas, in a deal valued at about $900 million, Reuters reported yesterday, citing a source.

Berkshire-based BG is divesting its stake in India's largest and oldest private sector city gas distribution company as part of its plan to focus on exploration and production, worldwide and has appointed Citigroup as an advisor to the proposed deal.

A consortium comprising state-run Oil and Natural Gas, Bharat Petroleum and Gujarat State Petroleum, is the only other bidder in the race to buy BG's stake in Gujarat Gas - the largest gas supplier in the country.  (See: Oil sector leaders keen on BG Group's stake in Gujarat Gas)

BG acquired the stake in 1997 from Gujarat Industrial Investment Corporation and Mafatlal Group for Rs170 crore, but is now seeking around Rs4,000 crore, based on Gujarat Gas market capitalisation of nearly Rs5,500 crore.

Other bidders who had shown their interest in buying the stake but dropped out to high valuations include Adani group, Torrent group, UK-based private equity firm Actis, and German utility company E.ON AG.

BG's stake is valued at about $700 million at current market price, and Barcelona-based Gas Natural Fenosa is likely to have bid close to the market price, while the Indian consortium has valued the stake at a discount, the report said.