The buyer of a 43.5 % stake in Punjab Tractors that is up for sale, is likely to have to set aside an additional Rs40 crore to make an open offer to minority shareholders for a portion of its engine making unit, according to takeover rules.
A successful bidder, will have to make an open offer for 20% of Punjab Tractor’s stake, because it will trigger a takeover limit according to equity regulations. That would take the bidder’s stake in Punjab Tractors to 63.5%, which in turn increase its holding in the unit and set off the same takeover rules for the subsidiary.
Punjab Tractors has a 33.2% stake in Swaraj Engines, which makes diesel engines for tractors.
A successful bidder with anything more than 46% of Punjab Tractors will effectively hold more than 15% in the engine company .
Swaraj Engines has a market capitalisation of Rs 199 crore and an open offer for 20% of that company would cost Rs 40 crore. The engine maker’s scrip closed 0.13% higher at Rs 160 per share yesterday.
Punjab Tractors, India’s fifth largest tractor maker, closed 6.8% higher at Rs 334 on the Bombay Stock Exchange. A 63.5% stake is worth Rs 1,280 crore at this price.
However analysts expect a successful bid to be at least a 10% premium over current market prices. Thus, the total cash outgo for the winner is likely to exceed Rs 1,483 crore.
The stake is being sold by Actis Capital LLP and the Burman family, promoters of Dabur group of companies.
The bidding for the tractor company has closed said one of the companies involved in the negotiations. Bidders may include domestic players including India’’s largest tractor maker Mahindra & Mahindra, Tractors and Farm Equipment and international companies such as New Holland Tractors and Same Deutz-Fahr. All four companies declined comment.
According to sources close to the transaction, there are seven bidders in the fray for a slice in Punjab Tractors, which will help the winner add 10% marketshare in the country’s 350,000- a year tractor market. Tractor sales are growing at double digit growth rates for the past two years boosted by a 9% economic growth and better credit availability.