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Promoters up the ante in the face of takeover threats

India Inc has finally woken up to the threat of hostile takeovers, as promoters upped the ante and began mopping up shares of their companies to consolidate stake in 2001. This also benefitted small shareholders by providing easier exit option and increased liquidity.

Companies which approached the markets in the year gone by with open offers or equity buyback plans include Bombay Dyeing, Britannia, VST Industries, Modi Rubber, Carrier Aircon, Thomas Cook, Philips and Gesco to name a few.

According to data available with the Securities and Exchange Board of India, the number of open offers increased to 61 in nine months ending December 2001 against 77 in the entire 2000.

But while most Indian promoters were content with hiking stakes, multinationals went in for raising stakes to 100 per cent and thus getting their Indian operations delisted from the country's bourses.

The latest saga unfolded when Ahmedabad based Lok Prakashan, which claims to have acquired over 14 per cent stake in Tata group company Voltas, threatened to launch an open offer for another 20 per cent.

This in turn prompted the House of Tatas to reportedly begin mopping up shares of Voltas to increase its stake by 10 per cent to over 30 per cent and thwart Lok Prakashan's move.

US major Carrier and Dutch giant Philips are close to getting complete control in their respective Indian operations soon.

Liquor major South African Breweries has similar plans for two Indian liquor companies - Mysore Breweries and Pals Distilleries.

Another Tata group company, Forbes Gokak, is presently facing a takeover threat from Shapoorji Pallonji as well as Pawankumar Group having received competing bids.

Earlier this year, when the Damani brothers launched their bid for cigarette major VST Industries, little did they know that this would force VST's UK parent BAT Plc to jump in the fray and begin consolidating stake in the Indian company.

In the end, while the Damanis managed to hike their stake by less than even five per cent through the open offer, shareholders of VST found an easy and liquid exit option since the final offer price was more than double the ruling scrip price before the takeover happened.

Again, when little-known A H Dalmia group of Delhi declared its intention to take over realty major Gesco Corporation, the latter's promoters roped in Mahindra Realty.

The Sheth family thus not only successfully thwarted the takeover bid, it also managed to find the much-needed cash for Gesco's operations. The company promoters are now buying back shares at a hefty premium.

In this deal, the Dalmias walked away with about Rs 90 million profit while Gesco's shareholders found an exit option and the Sheth-Mahindra combine brought about operational restructuring of Gesco.

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