Billionaire Ambani Brothers Agree…

Ambani Brothers Agree to Seek 'Harmony,' Gas Deal

May 24 (Bloomberg) -- India's estranged Ambani brothers showed the first signs of reconciliation since they split the family empire in 2005 by scrapping agreements that prevented the billionaires from competing with each other in business.

Mukesh Ambani, 53, and Anil Ambani, 50, the world's richest siblings, yesterday ended all non-compete accords reached in January 2006 and announced a new pact barring competition in natural gas-based power generation. In a rare show of unity, their companies issued almost identical statements saying they were "hopeful and confident" of creating an "environment of harmony, co-operation and collaboration."

The rapprochement comes after India's Supreme Court on May 7 ordered Reliance Industries Ltd., run by Mukesh, and a unit of the Anil Dhirubhai Ambani Group to negotiate a fresh deal for gas supply from India's largest field. Yesterday's accord paves the way for Mukesh to enter telecommunications and entertainment businesses and allows Anil to refine oil and make chemicals.

"They can now focus on business rather than court battles," Jagannadham Thunuguntla, head of equity at SMC Capitals Ltd. in New Delhi, said by telephone. "The court order signaled the end-game was near and this agreement is a step in that direction."

In the years since the two brothers split the empire founded by their father, the late Dhirubhai Ambani, their battle over the price of natural gas from Reliance Industries assets halted plans for a major north Indian power plant, while a merger between Anil's Reliance Communications Ltd. and South Africa's MTN Group Ltd. was scuttled after Mukesh said he had the first right to buy shares in his brother's company.

Empire Divided

The joint market value of Reliance Industries and the five Anil Ambani companies has more than tripled to at least $92 billion from $29 billion on Jan. 17, 2006, the day before the company split. The benchmark Sensitive Index of the Bombay Stock Exchange has gained 76.6 percent in the period.

Under the 2005 agreement to split the Reliance group, Mukesh kept the petrochemicals, oil and gas units along with the flagship company, Reliance Industries. Anil got newer businesses such as power, telecommunications, financial services and entertainment. Both retained rights to the Reliance name.

In October 2007, Anil's side of the business complained to the Indian markets regulator that Reliance Industries was trying to stall the initial public offering of the younger brother's Reliance Power Ltd.

MTN Merger

Nine months later, Anil's mobile phone services company, Reliance Communications, called off merger talks with MTN Group after Reliance Industries threatened to block the sale if it wasn't given the first option to buy shares in Reliance Communications.

Their fiercest fight though was over India's largest find of natural gas.

India's Supreme Court this month ordered the brothers to rework a gas-supply agreement that Anil Ambani said entitled his Reliance Natural Resources Ltd. to buy fuel from the KG-D6 asset in the Bay of Bengal at below a government-set price.

The court ruled that the two firms must reach an agreement on a new contract within six weeks of the start of talks.

The companies "will expeditiously negotiate gas supply arrangements, as per Supreme Court order, and hope to conclude negotiations very soon," Anil Ambani's group said yesterday.

Boards Agree

Reliance Industries declined 0.4 percent to 995.55 rupees on May 21, valuing the Mumbai-based explorer and refiner at $69.39 billion.

Reliance Infrastructure Ltd., the Anil Ambani controlled builder of a mass rapid transit system in Mumbai, was valued at $4.75 billion, Reliance Power Ltd. at $7.09 billion, Reliance Communications at $5.86 billion, Reliance Natural Resources at $1.55 billion and Reliance Capital Ltd. at $3.36 billion, valuing the five Anil Ambani group companies at $22.61 billion.

Boards of both groups have agreed to scrap the 2006 agreements, the companies said. Negotiations will "eliminate any room for further disputes between the two groups," according to the statements.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net