The Ambanis
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Ambanis
May 2010
Warring Ambanis clinch peace pact, agree to compete
Brothers Worked Out Deal Themselves
Prabhakar Sinha
New Delhi: If their business war was bitter and no-holds-barred, the peace was equally dramatic. At 5 minutes to 2pm on Sunday, officials of both Reliance Industries Ltd and ADAG (Anil Dhirubhai Ambani Group) were stunned to receive notes stating that the Ambani brothers had decided to scrap their non-compete agreement and effectively bury the hatchet.
The peace pact was thrashed out directly between the two brothers, with the blessings of their mother and — apparently — mediation by some spiritual gurus. In fact, Anil Ambani and Kokilaben left for a pilgrimage to Badrinath and Kedarnath on Wednesday last week after the deal was clinched. The pact was kept a closely-guarded secret, though the Prime Minister’s Office was reportedly kept in the loop and endorsed the development, saying it was in the best interest of the nation for the two brothers to be reconciled.
On Sunday, the two siblings announced the scrapping of the non-compete clause which was entered into between their respective groups in June 2006, when Dhirubhai Ambani’s business empire was carved out between them. Instead, they have entered into a simpler agreement, which is restricted only to gas-based power generation. Even there, RIL is allowed to set up plants for captive consumption.
The pact followed a recent directive of the Supreme Court on supply of gas from RIL-owned KG basin to Reliance Natural Resources Ltd for its Dadri power project. ‘‘RIL and RNRL will expeditiously negotiate gas supply arrangements in accordance with the orders of the Supreme Court,’’ both groups said in their respective statements. They also expressed confidence that the development would help create an overall environment of harmony, ‘‘co-operation and collaboration’’ between them.
Under the previous agreement, Anil could have ventured almost anywhere except petrochemicals and gas, while Mukesh’s companies were restricted from entering many sectors like finance, telecom, power and infrastructure. But Anil was facing problems in raising funds to expand Reliance Infocomm. WIN-WIN FOR BHAI-BHAI
After SC ruling, both brothers decided to resolve the issue. Mother Kokilaben and some spiritual leaders said to be involved. Deal completed before Anil Ambani and Kokilaben went to Badrinath on Wednesday The Non-Compete Clause
During their Jan 2006 settlement, RIL and ADAG entered into a noncompete clause, under which Mukesh could not enter finance, power, road and construction, and telecom sectors. Anil barred from entering petrochemical and gas sectors
The clause was valid till 2018 for financial sector, and 2015 for others Invoked In The Past BY ANIL AMBANI
June 2006: In the power sector, when Mukesh-led RIL wanted to set up a 2000mw captive power project in its Gurgaon SEZ
Jan 2008: When RIL wanted to start a non-banking finance company to finance customers of Reliance Digital
BY MUKESH AMBANI
June 2008: When Anil Ambani was in talks to acquire African telecom major MTN through share swap The New Agreement Scraps the no-compete clause except in gas-based power generation, in which RIL cannot venture except for captive consumption Sectors which both groups may enter following new pact RIL group: Finance, telecom and infrastructure ADAG: Will provide Anil financial flexibility to raise funds in telecom sector From Recrimination To Reconciliation
1999 | NELP takes off. Govt invites global tenders for exploration in oil and gas fields. RIL and NIKO emerge successful bidder of KGD6
June 18, 2005 | The Ambani brothers reach a settlement to split the Reliance group in a deal brokered by Kokilaben
Dec 9, 2005 | HC okays RIL demerger scheme. Gas, coal, telecom and financial services businesses go to Anil and Mukesh retains flagship RIL
Jan 12, 2006 | The board of directors of RIL approve pact that calls for 28 million units of gas to be supplied to Anil Ambani group and up to 40 million units if the contract with NTPC does not materialise Feb-Jul, 2006 | Anil’s RNRL seeks permission from the petroleum ministry to lay pipelines for transporting gas from Kakinada in Andhra Pradesh to Dadri in Uttar Pradesh. RIL asks ministry to approve the gas price at $2.34 per unit based on bids called by NTPC, but the permission is denied Nov 8, 2006 | RNRL takes the dispute to court. Later, company wants RIL to be restrained from selling 28 million units of gas to any third party
May 3, 2007 | Company judge restrains RIL from creating third party rights in gas meant for RNRL Oct 10, 2007 | Govt okays market price determined by RIL at above $4.2/mmBtu Oct 15, 2007 | Company Judge upholds RNRL’s case, says MoU between parties binding. Directs them to renegotiate gas sale purchase agreement instead of directing a modification of the scheme Dec, 2007 | RIL and RNRL file separate appeals against the judgment. RNRL says court did not give directions for amendment of gas supply agreement to make the scheme workable Jan 30, 2009 | Mumbai HC concludes hearing; passes interim order lifting stay on the sale of gas from KGD6 Jun 15, 2009 | HC asks both sides to honour 2005 MoU and arrive at a fresh ‘bankable agreement' within a month to ensure RNRL gets 28 mmscmd gas from RIL, but till then continues Jan 30 order Jul 3, 2009 | RNRL moves Supreme Court against HC ruling May 7, 2010 | SC rules in favour of RIL, giving the brothers six months to renegotiate the deal at the governmentdecided price of $4.2/ mmBtu May 23, 2010 | Brothers decide to scrap the existing non-compete clause with exception that Mukesh can enter gas-based power generation for captive consumption only OTHER DISPUTES
July 2008 | Anil's RCOM called off merger talks with MTN Group after RIL threatened to block the sale if it wasn’t given the first option to buy shares in RCOM Oct 2007 | ADAG complained to the stock market regulator Sebi that RIL was trying to stall the IPO of Reliance Power
