MUMBAI Anil Ambani's Reliance Power(RPOL.BO) and sister firm Reliance Natural ResourcesRENR.BO will discuss whether to merge on Sunday, continuing a spree of activity in the billionaire's empire since the end of a dispute with his brother.
The two companies said after the close of trading on Friday they would hold separate board meetings to consider a tie-up.
Shares in Reliance Power, valued at $8.75 billion, closed up 3.3 percent and Reliance Natural shares, with a market capitalisation of $2.3 billion, ended down 1.9 percent amid market talk about a possible deal.
Based on the market values of the two firms, Angel Broking analyst Rupesh Sankhe expects Reliance Natural shareholders to receive one Reliance Power share for every 3.75 to four shares they hold.
"Reliance Natural's basic job was to supply gas to Reliance Power. Now this is just a consolidation after the court verdict," said Ajay Parmar, head of research at Emkay Global.
The Supreme Court ruled in May that Reliance Natural and Reliance Industries, controlled by Anil's older brother, Mukesh Ambani, had to renegotiate their private gas pricing agreement to bring it in line with the government-approved price.
Reliance Industries operates the country's biggest gas find, in the D6 block of the Krishna Godavari basin off India's east coast.
Reliance Natural had wanted Reliance Industries to honour the pricing deal between the brothers, struck when the Reliance empire was split, to supply it with 28 million standard cubic metres per day (mmscmd) of gas for 17 years at $2.34, about half the government-set price.
The gas is critical for Anil Ambani's power business, including projects being built by Reliance Power.
Reliance Power went public in early 2008 in a $2.9 billion initial public offering -- India's biggest -- but has never risen above its issue price.
Reliance Natural and Reliance Industries said last month they had signed a revised gas supply agreement, but did not disclose any details.
The Ambani brothers split their late father Dhirubhai's business empire five years ago after disagreeing over ownership.
The Supreme Court ruling brought the estranged brothers back to the negotiating table, where they ended their pact that had forbidden them from competing with each other.
The brothers have been active dealmakers ever since.
Anil Ambani's Reliance Communications, India's No. 2 cellphone operator, agreed in late June to merge its telecoms towers business with that of GTL Infrastructure and is also looking to sell a 26 percent stake in itself.
Mukesh Ambani's Reliance Industries, the country's biggest listed company, made a dramatic return to telecoms by buying the only company to win nationwide broadband wireless spectrum in a recent government auction.
(Editing by Tony Munroe and Karen Foster)