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Emami offer for Zandu may not find takers

Emami offer for Zandu may not find takers
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First Published: Mon, Jul 21 2008. 12 52 AM IST
Updated: Mon, Jul 21 2008. 12 52 AM IST
Kolkata/Mumbai: The six-week-long takeover battle for Zandu Pharmaceutical Works Ltd—facing a buyout threat from Kolkata-based cosmetics firm Emami Ltd—is entering a new phase with the suitor demanding the Parikh family, which runs the Mumbai drug firm, share management control or sell out its holding.
The demand comes at a time when a public offer made by Emami, after buying some 27.5% equity of Zandu in June, to buy at least one-fifth of the target’s equity is set to fail over the difference in the tendered price of Rs7,135 each and Zandu’s current market price.
Zandu shares closed on Friday at Rs20,300 each, some 177% more than its price on 29 May—the date when Emami made public its purchase in Zandu. Since then, the Bombay Stock Exchange’s benchmark Sensex index has shed 16% to 13,635.4 points.
On Wednesday, when the public offer opens, there might be no sellers, especially since Emami’s management, as Mint reported on 4 July, has decided not to raise the offer price.
“I’m in touch with the managing director of Zandu and we are discussing the way forward. We have asked them to either share management control with us or sell out,” Emami’s chairman R.S. Agarwal told Mint. “We are hopeful of finding an amicable solution to the standoff.”
Asked about the price Emami, whose board has authorized it to raise Rs250 crore for the buyout, would offer the Parikhs, Agarwal refused to name a figure but said, “The ruling market price is unreal; it has gone up because of some operators’ play.”
Meanwhile, the promoter group at Zandu, the Mumbai-based Parikh family, which is resisting the hostile takeover, has raised its stake in the firm to close to 21% from the earlier 18%—a defensive move that an analyst said indicated the management was padding up for a battle.
“Since the current management has been aggressive in market buy, it helped them ramp up their stake as well as maintain the price high at the counter to let down Emami’s open offer,” a sector analyst at Mumbai with a foreign brokerage firm said, asking he and his employer not be named because he is not authorized to speak with the media.
A Zandu insider said Emami’s attempts to enter the Mumbai firm’s board was not going to be easy. “The Zandu board in the past decades never had active representation from the promoter family barring two directors (from the Parikh and Vaidya families), with the rest being independent directors,” this person said on the condition of anonymity. “So, it is not necessary that anyone should come on board just because they have a significant stake.”
It was the 23.6% stake held by Vaidyas, the Parikhs’ partners in Zandu for nine decades, that Emami bought on 29 May for some Rs130 crore, setting off the current battle.
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First Published: Mon, Jul 21 2008. 12 52 AM IST