Mumbai: Merck Ltd, the India-listed unit of German drug and chemical maker Merck KgaA, on Wednesday announced a buy-back offer in which it would repurchase at least 16.35% stake from investors.
In a notice to stock exchanges, Merck Ltd said it would buy the shares at Rs435 each. The offer is valued at Rs128 crore, or about 25% of the company’s paid-up capital and free reserve of Rs451.39 crore, as per its balance sheet for the year ended 31 December.
Merck’s shares rose 2.91% to close at Rs386.70 on the Bombay Stock Exchange on Wednesday, the day when the exchange’s bellwether Sensex index fell 1.89% to close at 14,060.66 points.
R.L. Shenoy, Merck Ltd’s finance director, told Mint that the company had proposed to invest part of its reserves for some strategic acquisitions in India. “Since it did not happen as expected, we wanted to give back a portion of it to the investors by way of share buy-back at a premium, though the plan for Indian acquisitions are still under consideration seriously, ” he said.
A share buy-back by the firm extinguishes that portion of shares from the authorized equity base of the company, thereby reducing the number of shares and sending up the key earnings per share ratio.
A sector analyst with a Mumbai-based foreign brokerage said since Merck is not raising promoters’ stake, investors will benefit. “Also the offer price is more than a long-time average of Merck share price on the stock exchanges, it is unlikely that investors would refuse tendering their shares,” he said, requesting anonymity.