Yassir A. Pitalwalla and Shilpa Shree
Mumbai: Uping the ante in what has become a protracted bidding war, Suzlon Energy Ltd has offered €150 per share, or €1.22 billion (Rs6,997.32 crore), to try and wrest German wind turbine maker REpower Systems AG from rival suitor Areva S.A. of France.
Areva had an offer for €140 a share, part of a see-saw battle for a company that has €450 million in annual revenues.
Investors of REpower, who have seen their stakes swell in value in the duel, promptly pushed up the per-share price on the Frankfurt exchange by 3.3% to €158, signalling that they expected the eventual winner to pay even more.
“We will reconsider the matter,” a spokesman for Areva said.
The new offer price by Suzlon is a 42.85% premium over Areva’s original offer on 22 January. REpower’s shares are now currently trading at more than double their average weighted share price in the three months prior to Areva’s first offer.
“Indian companies have realized that the only way they can beat others to the bid in a global M&A game is by sharing some portion of the identified upside to the acquisition via a higher bid price. Of course, the challenge for firms then is to unlock the identified value post M&A,” says Russell I. Parera, chief executive officer for the Indian operations of consulting and audit firm KPMG.
Since February, when Suzlon announced its first counter-offer for the German firm, the company has lost Rs7,373.85 crore in market capitalization, partly due to a general decline in the Indian stock market.
Suzlon’s shares ended on Tuesday at Rs988.90, up 0.17%. Some analysts said the downside from a higher price for REpower was already factored into Suzlon’s beaten-down share price, down 27.16% in the past year even as the broader market rose 13%.
“Everybody in India is trying to swallow bigger fish,” notes Ananta P. Sarma, head, investment banking, IDBI Capital Market Services Ltd. “While such an acquisition is being digested, the risk increases because the company is vulnerable. Often in the case of such large acquisitions, analysts believe the company is taking too long-term a view and hence further discount future