Mumbai: Competing open offers for Fame India Ltd’s shares, scheduled to start from Thursday, have been pushed back indefinitely as markets regulator Securities and Exchange Board of India, or Sebi, had not yet given its approval for the share purchase to either Inox Leisure Ltd or Anil Ambani’s Reliance MediaWorks Ltd.
A Reliance MediaWorks spokesperson confirmed the firm had not yet received Sebi approval for its counter-offer for control of the cinema theatre chain, while an Inox spokesperson declined to comment.
A spokesperson for Sebi said the regulator does not comment on specific corporate approvals.
In the aftermath of a takeover battle, Reliance MediaWorks even wrote to Sebi alleging collusion in the manner in which Inox procured a 43.3% stake in Fame from its promoter Shravan Shroff in early February, as well as in a reconstitution of the Fame board of directors to seat Inox executives.
Reliance MediaWorks has been protesting the deal on the grounds that it offered the better price for Shroff’s stake; its current open offer for Fame shares is at least 64% higher than Inox.
Inox Leisure had made an open offer to buy 20% from public shareholders after acquiring a 50.49% stake in Fame India in two transactions—first by buying 43.28% from Shroff, and then purchasing an additional 7.21% from the market.
Reliance MediaWorks— which has a 12.2% stake in Fame India—on 21 February launched a counter offer for a nearly 62% stake in Fame at Rs83.40 per share—nearly two weeks after Fame promoters had rejected it in favour of Inox’s offer of Rs44-45 a share.
Inox, which made the open offer at Rs51 a share, has so far kept a lid on its strategy and resisted pressure to hike its offer price.
Deepak Asher, Inox’s director, said he was not speaking to the media on the issue.
“It was a foregone conclusion which way the investors would have headed if the open offers had been launched at their current stated prices, but Sebi’s permission (is) still not in. The whole matter is in limbo,” said a Mumbai-based sector analyst who tracks these firms for a local brokerage.
“The ball is now in Inox’s court,” he added.
Inox now has only two options left: It can sell its 51.48% stake to Reliance and make a tidy profit, or it can raise its offer price, which would significantly increase the cost of acquisition.
Inox has 109 cinema screens in India while Reliance, the country’s largest such operator, has 246.
Both firms are eyeing Fame’s 93 screens across 12 cities, which would add substantially to their reach.
In its first complaint to Sebi, Reliance MediaWorks had claimed that the Fame-Inox transaction lacked transparency and had compromised investor interest.
It has said the first offer was underpriced and “certain pre-existing financial arrangements” existed between Fame promoters and Inox, with some shares being transferred to a separate account more than a year ago.
On 2 March, Reliance MediaWorks wrote to Sebi again to protest the induction of Inox directors Kishore Biyani, Pavan Jain and Deepak Asher on Fame’s board, saying this would give Inox “unfair advantage and unearned control over the affairs of the target company”.
This, they said, prejudiced Reliance’s interests and violated the principles of equality.