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Hindustan Petroleum Corporation Ltd (HPCL) is set to pick up a controlling stake of 67 per cent in Kenya Petroleum Refinery Ltd (KPRL) in a deal valued at around Rs 2,200 crore ($500 million).
HPCL will also acquire 50 per cent of the marketing rights of BP in the African company.
Sources in the know of the development said HPCL would acquire the entire 50 per cent stake of the Kenyan government and 17.11 per cent of BP Africa in KPRL. Apart from the Kenyan government and BP, other shareholders of KPRL are Caltex (15.77 per cent) and Shell (17.11 per cent). The marketing rights are held equally by BP Africa and Shell.
The sources indicated that HPCL was in the last lap of the due diligence process and would close the deal over the next fortnight. Mumbai-based Amarchand & Mangaldas & Suresh A Shroff Co is believed to be the legal adviser to the deal, while Delloitte & Touche is understood to be the financial adviser of HPCL for the transaction.
The HPCL corporate communication department declined to comment on this. The company's Chairman and Managing Director MB Lal could not be reached for comments.
The HPCL stock lost ground on a firm Mumbai market today, closing at Rs 315.25, 0.71 per cent lower than Tuesday's closing on the Bombay Stock Exchange. The company will hold its 53rd annual general meeting on Wednesday.
Mombassa-based KRPL has a topping and reforming refinery with a design capacity of 80,000 barrels per day. It supplies refined products to the Kenyan market, Uganda and northern Tanzania. KPRL is the only refinery in sub-Saharan Africa that has always operated on a processing fee basis.
Since 1994, the refinery has been running at around 40 per cent of its capacity.
The refinery has been under a threat of closure for over a decade now due to its shareholders' unwillingness to invest and the marketers' processing losses.
HPCL has been looking for an opening in African countries, particularly in Senegal and Kenya, for quite some time.
The company has conducted studies in 20 countries for opportunities in the petroleum sector.
It did zero in on a 25 per cent stake in a refinery in Egypt recently, where BP and Shell held stakes, but the deal did not work out.
HPCL is also in talks with a number of petroleum giants such as US-based Chevron, Saudi Aramco, UK-based British Petroleum and France-based Total for forming joint ventures in the refining sector.
It had announced its intention to take foreign petroleum majors along for its Rs 17,000-crore refinery and petrochemicals complex at Bhatinda and for a refinery in Visakhapatnam.
