Kolkata: The board of herbal healthcare company Zandu Pharmaceutical Works Ltd on Friday dropped a proposal to sell shares to its promoters—the Parikh family—after Emami Ltd, the Kolkata-based conglomerate that has recently acquired 27.5% stake in it, sent a legal notice opposing the proposed move.
The Parikh family, which holds 18% in the company, has been running the operations of Zandu for several years. It now faces a takeover threat from Emami which has made an open offer to acquire 20% more in the company.
Emami’s executive director Harsh Vardhan Agarwal said, “We sent a notice challenging the proposal because we felt it was not in the interest of minority shareholders. Zandu’s board, which has some very respectable independent directors, took no time in rejecting the proposed share sale.”
Zandu’s managing director Girish G. Parikh refused to comment on why the proposal was dropped. Emami could have blocked the proposed preferential allotment even if approved by Zandu’s board because it holds more than 26% stake in the company, and under Indian laws, the proposal would have needed shareholders owning at least 74% to vote in favour of it to go through. However, if approved by the company’s shareholders, the preferential allotment of shares would have in one stroke raised the promoters’ 18% holding and pared Emami’s 27.5% stake in the firm.
Asked if the Parikh family was now planning to make a counterbid, Zandu’s managing director said, “I don’t wish to speculate. Our legal department is weighing all options.”
A member of the Parikh family had earlier said they had first right of refusal to the 24% stake that the Vaidya family— the founders of Zandu—sold to Emami a week ago for around Rs130 crore. Emami paid them Rs6,900 a share, and on Monday said it would be paying Rs7,315 a share to those selling under the open offer.
Since Emami announced its open offer, shares of Zandu rose sharply to touch a 52-week high of Rs10,650 on the National Stock Exchange, or NSE. It fell Rs394, or 4%, on Friday to close at Rs9,976 on NSE, while the bourse’s key index S&P CNX Nifty closed 1% lower at Rs4,627.80.