Retraction of ONGC's Mozambique deal could invite Sebi scrutiny

ONGC's retraction of its press release announcing that its overseas arm ONGC Videsh (OVL), and Oil India (OIL) had signed a definitive agreement to buy Videocon Industries' 10-per cent stake in a Mozambique gas field for $2.48 billion could attract action from securities regulator Securities and Exchange Board of India (Sebi).

ONGC yesterday issued a release stating that OVL and OIL were buying Videocon's 10-per cent stake in the Rovuma Area 1 Offshore Block in Mozambique for $2.48 billion, the largest overseas gas block acquisition announced by state-owned companies. (See: OVL, Oil India to buy Videocon's stake in Mozambique gas field for $2.48 bn)

It seems in a rare goof-up, someone at ONGC had issued an inadvertant go ahead for the press release even before finer points of the deal had been finalised.

ONGC issued a retraction stating, "ONGC regrets to announce that the press release titled 'OVL and OIL sign definitive agreement to acquire interest in the Rovuma Area-1 offshore block in Mozambique' has been inadvertently issued. The above-referred Release stands withdrawn."

The retraction came two and half hours after the state-owned energy giant made public its $2.47 billion acquisition. The securities regulator can launch a probe since ONGC, OIL and Videocon are all listed companies.

Merger and acquisition announcements tend to create sharp fluctuations in share prices of both the acquirer and the acquired companies.

To make matters worse, the price-sensitive news carried a statement from ONGC chairman Sudhir Vasudeva, stating, "Considering the growing importance of natural gas in the primary energy basket, this acquisition is a significant step by OVL / ONGC towards ensuring the energy security of our country."

Houston-based Anadarko Petroleum, the operator of the Rovuma Area-1 field with 36-per cent stake, is also offloading 10-per cent and ONGC is reported to have tabled a bid.

It is not clear whether this deal has been finalised, but ONGC appears to be the front runner after Royal Dutch Shell, one of the prime contenders, saying that the asking price was too steep.

This February, a premature press release announcing the $1.19-billion merger of the two US office supply retailers Office Depot and OfficeMax sent Office Depot's stock rising by more than 7 per cent, while OfficeMax was up more than 8 per cent.

The press release on Office Depot's website that was published - and then taken down - was a draft, and the terms described in it were not final.

It would be interesting to see what Sebi does in the case of ONGC, which is a government entity.