Kolkata: The management of Kolkata-based personal care products maker Emami Ltd valued the headquarters of Zandu Pharmaceutical Works Ltd in Dadar, Mumbai, at Rs350 crore when in June it announced its unsolicited bid to acquire a controlling stake in the 98-year-old herbal health care company.
Road ahead: Zandu and Emami may be merged, says Emami chairman R.S. Agarwal. Indranil Bhoumik / Mint
That was at the height of the real estate boom. “I can’t say how much the property is worth now,” says Emami chairman R.S. Agarwal, who, despite the downturn in the economy, does not regret his decision to pay as much as Rs750 crore for a 72% stake in Zandu. “When you buy something, you buy for long-term value…being in a similar line of business, we knew the intrinsic value of Zandu.”
Towards the end of May, Emami concluded a deal after protracted negotiation to acquire a 23.6% stake from Dev Kumar Vaidya and his sister Anita Vaidya, whose great grandfather Jugatram Vaidya founded Zandu in October 1910.
In keeping with Indian takeover laws, Emami made an open offer for 20% more, kicking off a battle with the Parikh brothers, who have been managing the operations of Zandu for years.
Four-and-a-half months later, the Parikh family gave up, and Emami concluded India’s first hostile takeover in many years.
Zandu’s former managing director Girish G. Parikh, who continues to be a director on the board of the herbal health care company, was not contactable.
In his first media interview since the takeover of Zandu was concluded, Agarwal said his sons, Harsh Vardhan and Aditya, who are directors of Emami, were at times sceptical about the price that Emami eventually paid for Zandu. “There was a lot of arithmetics, a lot of calculations,” says Agarwal. But in the end he managed to prevail over his sons because of the support of his partner—Emami’s co-chairman R.S. Goenka—who persuaded the Agarwal siblings to trust his judgment.
Edited excerpts:
It must have been a game of chess that you played to oust the Parikh family from Zandu?
Yes… They (Parikh family) had some friends in Gujarat—some big companies and industrialists. A company from eastern India taking over a company from western India…so there was to be resistance. They offered financial assistance to thwart our efforts. We knew they (Parikh family) would go for creeping acquisition, but we couldn’t (buy shares from the market) as per Sebi (Securities and Exchange Board of India) rules. Then they approached CLB (Company Law Board) so that Emami couldn’t get in. There was a lot of apprehension among the youngsters…we went on investing—Rs200 crore, Rs300 crore, Rs400 crore —and what if we got stuck in the end? But Zandu had too many brothers and partners (controlling the company)—at least eight-10—and they never got along very well.