PFC inks pact to buy majority stake in REC
New Delhi: Power Finance Corporation Ltd (PFC) has signed a Share Purchase Agreement to acquire 103.94 crore equity shares of INR 10 each, of REC Limited from the President of India constituting 52.63 per cent of the paid-up share capital of REC Ltd. This is a major milestone achieved by PFC, who is now slated to become a promoter and the holding company of REC Limited.
The acquisition of REC Limited was in pursuance to the in-principle approval dated 6th December 2018 from the Cabinet Committee on Economic Affairs for the strategic sale of 52.63 per cent of the paid up equity shareholding of REC held by the President of India (acting through Ministry of Power, Government of India) to PFC along with transfer of management control.
Both PFC and REC are Navratna Central Public Sector Enterprises with combined annual revenues of about Rs. 50,000 Crore and this acquisition is step towards consolidation of companies operating in the same space.
Subsequent to the PFC shareholders' approval for the transaction, the Board of Directors of PFC considered the transaction and approved the acquisition of the 52.63 per cent shareholding of the President of India in REC Limited, at a cash purchase consideration of Rs 139.50 per share with total acquisition cost of about INR 14,500 Crore.
The closing price of REC on 19th March, 2019 was INR 148.40 per share. The consideration for the transaction is expected to be paid on 28th March, 2019 and funds for the same have been arranged by PFC already.
The acquisition would enable increased efficiencies in lending processes and policies across both the institutions and would create public value by offering better loan products to the power sector.
The convergence between the entities as combined group entities would help the power sector reap benefits from a decentralized outreach of REC and a professional project finance expertise of PFC.