Bangalore: Tuesday marked a day of offers and counter-offers from ABG Shipyard Ltd, India’s largest private sector shipbuilder, and its nearest rival Bharati Shipyard Ltd, for a strategic stake in Great Offshore Ltd, an offshore services firm.
First, ABG Shipyard made a Rs375 a share counter-offer for buying a 32.12% stake held by the public in Great Offshore. Bharati Shipyard has a 14.89% stake in Great Offshore, and had, earlier this month made an offer for an additional 20% at Rs344 a share.
By late afternoon, P.C. Kapoor, managing director of Bharati Shipyard, said at a press conference that his board would make a revised higher offer in a few days. Kapoor also told Mint the company had bought shares equivalent to around 4.5% stake in the company from Bharat and Ravi Sheth for Rs403 a share. The buy takes Bharati’s holding in Great Offshore to 19.1%.
Bharat and Ravi Sheth are Vijay Sheth’s cousins. Vijay Sheth had spun off the lucrative oilfield services business from Great Eastern Shipping Co. Ltd after a long-drawn out tussle with his cousins.
If Bharati increases its offer, ABG Shipyard would also consider raising its price at the right time, the company’s chairman and managing director Rishi Agarwal had told Mint before Kapoor’s press conference. ABG would fund the acquisition with internal accruals, he added. “This is an opportunity,” Agarwal said on the phone from Mumbai. “We feel this is a good platform. So, why let Bharati get away like this?”
ABG’s offer runs from 13 August to 1 September. The last date for a competitive bid is Wednesday, 24 June.
The offers mark a new twist in the saga of Great Offshore whose former vice-chairman and managing director Vijay Kantilal Sheth lost control of the company in May after failing to redeem shares he had pledged, becoming the first promoter in India’s history to face such a situation. When Sheth couldn’t repay the loan, Bharati decided to invoke the pledge and acquired the shares at Rs315 a share on 8 May, making it the largest shareholder of Great Offshore with a 14.89% stake.
ABG already holds a 2.02% stake in Great Offshore, purchased late last year from the open market. The counter offers are good news for shareholders of Great Offshore in the short-term, but management issues remain a key concern as the new promoters are (both) from the manufacturing side of the shipping business, said Navindar M., an analyst at Mumbai-based Natson Securities Pvt. Ltd. Shares of Great Offshore gained 30.35% to close at Rs413.60 on Tuesday on the Bombay Stock Exchange (BSE) after ABG announced its counter open offer. The Sensex, the benchmark index of the BSE, closed almost flat at 14,324.01. Both ABG and Bharati are eyeing Great Offshore as an entry point into the offshore oilfield services market to become integrated players in the sector. The acquisition will help ABG consolidate its position in the offshore supply vessels market and oil rigs market. It will also make it an integrated marine services company, ABG said in a statement. ABG already has a ship-owing unit called PFS Shipping India Ltd.
Analysts said the move would help both firms mitigate a continuing downturn in the shipbuilding market. “Both ABG and Bharati are struggling to get new business as orders for building new ships globally have fallen drastically in the wake of the economic recession,” said Navindar of Natson Securities.