An intense lobbying effort is under way by both French state controlled Areva SA and Suzlon Energy Ltd to try and woo hedge funds that are in a position to crown the victor in the race to buy the world’s seventh-largest wind turbine maker Repower Systems AG.
Shareholders had until 4 May to tender their shares to either suitor. Areva, which had a stake in Repower, garnered 30.16% of the total equity in the German company, while Suzlon and its partner Martifer ended up with a 30.91% stake.
Hedge funds control a large percentage of Repower’s remaining 38.93% shares.
Which way will it blow? Repower is currently trading at €160.01 per share, higher than Suzlon’s offer of €150 per share and Areva’s €140.
“An extended grace period till 24 May is available to each bidder before the bid finally closes under the rules of the German federal financial supervisory authority BaFin,” says Aditya Sanghi, head of investment banking for Yes Bank Ltd, which is one of the investment banks involved in advising Suzlon Energy on the takeover bid. Areva bid €1.14 billion, or Rs6,384 crore, while Suzlon offered €1.2 billion, or Rs6,720 crore.
According to investment banks associated with the bidders, hedge funds normally tender their shares on the penultimate or the last day of the bid expiry, waiting out in the hope of extracting a higher price from rival bidders.
Repower stock is currently traded at €160.01 per share, higher than the €150 per share offered by Suzlon and the €140 per share offered by Areva. While this would imply that Suzlon would have to up its bid by almost 6.67% and Areva by 14.29% to match the current market price, Repower does have limited trading volume, with just 0.57% of the paid-up equity capital traded on any given day.
So any big seller might not be able to unload a significant stake in one swoop at the current price without significantly impacting the traded price.
Repower’s shares have risen 142.5% in the past six months and are trading near an all-time high.
Repower’s daily traded volume also fluctuates between a couple of thousand shares and over 100,000 shares.
The company currently has 89.82 lakh shares of €1 each outsanding on its balance sheet.
Under German law, either bidder would need to acquire 50% plus one share in Repower to be able to acquire control of the company.
Suzlon is budgeting spending a hefty Rs167.34 crore on the takeover offer itself, according to regulatory documents. In comparison, for the quarter ended 31 December, Suzlon posted a profit after tax of Rs172.72 crore.
The executive and supervisory board of Repower have recommended either offer by Areva and Suzlon as to be ‘suitable and fair’, but have refrained from recommending whether shareholders tender their shares to either bidder or, sell them in the open market at a higher price.