Kolkata / Mumbai: Personal-care products maker Emami Ltd on Monday more than doubled its open offer price for an additional 20% stake in Zandu Pharmaceutical Works Ltd to Rs15,000 per share to catch up with a surge in the market price of the herbal health care firm and keep the offer attractive.
If fully subscribed, Emami would have to pay Rs242 crore for the open offer. It has already spent around Rs150 crore for a 27.5% stake in Zandu, acquired from one of its founders, the Vaidya family, and the market.
“Given the current market price of Zandu’s shares, we did not expect to get a single share from the market,” said R.S. Agarwal, Emami’s chairman. “We still believe that the sudden spurt in the stock price of Zandu was a result of speculators’ play, but we have to play by the rules of the market.”
Keeping with Indian takeover laws, Kolkata-based Emami announced the open offer on 2 June after it acquired 24% of Zandu’s shares from the Vaidya family. It had initially priced the open offer at Rs7,315 per share.
Zandu shares touched a high of Rs20,300 on 21 July, surging from Rs7,012.85 on 29 May when Emami made public its purchase in Zandu. Emami’s revised offer still trails Zandu’s current price of Rs16,728 at close on Monday on the Bombay Stock Exchange.
The open offer, scheduled to begin on 24 July, hasn’t been launched yet because Zandu’s management challenged the transaction between the Vaidya family and Emami. Capital markets regulator Securities and Exchange Board of India (Sebi) cleared the open offer last week, Emami said, but didn’t immediately indicate a revised schedule.
Emami’s bid for the herbal health care company triggered a takeover battle with the Zandu management led by the Parikh family, co-founders of the company. They acquired shares from the market and shored up their holding to a shade over 20%, from 18% at the end of March.
“Emami’s decision to more than double its offer price is probably an indication that it has struck a deal with some of Zandu’s key shareholders... 56 individuals collectively own a 21.58% stake in Zandu,” said a stock market analyst. “But it is difficult to offload large stakes in Zandu in the open market because the stock is illiquid; the price would crash if you put a sale order of say 1,000 shares. So the revised offer is clearly targeted at large shareholders,” he added, asking not to be named.
Aditya Agarwal, one of Emami’s directors, had earlier told Mint that his company was persuading several large shareholders of Zandu, including some from the extended Parikh family, to sell out. On whether a deal had been struck, his brother Harsh Agarwal, also a director in Emami, would only say, “We continue to talk to several people.”
Zandu’s chief promoter and managing director Girish Parikh said, “As the law requires, Emami can make an open offer at a price suitable to them. It is also free to revise the offer.”