By By Mark Kleinman, City Editor
Vince Cable, the Business Secretary, has been drawn into a row about the controversial takeover of a London-listed oil group that is reliant on funds from one of Russia's largest banks.
Sky News has seen a letter sent by the Association of British Insurers (ABI) to Mr Cable warning him that the Stanlow refinery, which produces 15% of the UK's transport fuel, is being used as collateral in a bid for Essar Energy.
Robert Hingley, an ABI director, said in the letter to Mr Cable that Essar Global, the vehicle of the billionaire Ruia brothers who want to buy the company, had failed to provide any indication of its plans for the Stanlow site in north-west England.
By highlighting the Russian provenance of the financing for the offer, the ABI's intervention will escalate tensions over the cut-price bid by Essar Global for the 22% of Essar Energy shares it does not already own.
The Ruias listed Essar Energy in London by selling shares less than four years ago priced at six times the price they are now offering.
The cut-price offer has sparked fury from big City institutions, including Standard Life Investments, which in February described it as "cynical opportunism" and "a calculated attempt to deprive minority shareholders of the substantial future upside in Essar Energy's valuation".
Under stock exchange rules, because the Ruias already control a majority of the shares, they can declare their offer unconditional even if no other shareholders accept their bid.
Doing so would enable them to delist the company without a vote, which would either force investors to accept just 70p-a-share or to remain shareholders in a more highly-indebted and unlisted company where they possess no influence.
The ABI special committee, which represents major City shareholders including Standard Life and Henderson, has urged Essar Global to commit to a delisting only if a majority of the independent investors accept its offer.
The Financial Conduct Authority is changing its rules relating to delistings but has irritated the ABI by not applying that rule-change to takeover situations.
It is unclear what power Mr Cable has to intervene in the situation, although question marks over the future of the Stanlow refinery and the involvement of Russian funds are likely to put the issue on the political agenda.
Investors believe that while the right to make an offer for the company was detailed in a relationship agreement drawn up when Essar Energy floated, its terms were not made clear in the shareholder prospectus, which could provide the ABI with another legal avenue to explore.
Skadden Arps Slate Meagher & Flom, a law firm, is advising the ABI committee.
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