Kolkata: Personal products maker Emami Ltd, which has acquired 27.5% of Zandu Pharmaceutical Works Ltd, is willing to pay a premium for a stake held by a founder family that manages operations at the herbal health care company.
Emami’s move is aimed at gaining control at Zandu as an open offer mandated by law could potentially raise its stake to 47.5%, and avoid a possible effort from the Parikh family, which manages Zandu now, to acquire the company.
According to Zandu’s filings with stock exchanges, the Parikh family owns around 18% of the 98-year-old company. A firm offer to buy the stake is likely going to be made to the Parikh family towards the end of this week, according to a director of Emami who did not wish to be named because it’s a sensitive issue.
On Friday, Emami said it acquired the Vaidya family’s 24% stake in the company for an undisclosed sum. The Vaidyas were the principal founders of Zandu, but were passive investors of late, and the Parikhs were managing the company for several years.
While announcing the acquisition, Emami said it would make an open offer for 20% more of Zandu’s shares, which, if fully subscribed, will raise its stake to 47.5%. It had earlier acquired 3.5% of Zandu’s stake from the market. In India, companies acquiring a stake of 15% or more must make an offer to buy another 20% in the target firm.
“We haven’t spoken to the Parikhs yet because we want them to decide what they want to do with their stake before we make an offer. Because it will give us clear control of the company, we are willing to pay a premium if they agree to sell out,” the Emami director said.
Zandu’s shares closed at Rs8,132.80 each at the National Stock Exchange on Friday. At that price, the Parikh family’s stake is valued at about Rs118 crore.
The Parikhs are not showing any signs of bowing out, at least as of now. Girish Parikh, managing director of Zandu, said the family was weighing its options. Asked if they were likely to make a counter bid and try to raise their holding in the company, Parikh said, “Can’t comment till our board has met.” He didn’t specify when the board was meeting.
R.S. Agarwal, chairman of Emami, said his company had paid around Rs160 crore to acquire the 27.5% stake. The open offer, which is expected to be priced between Rs7,300 and Rs7,500 a share, according to Emami’s chairman, is going to cost around Rs120crore.
Though Emami said its intention was to be a “strategic investor”, Agarwal had said the deal “could eventually lead to takeover of the company”.