Kolkata: Truce talks have begun between Emami Ltd, which has made a play for herbal health care firm Zandu Pharmaceutical Works Ltd and the Parikh family that founded Zandu, and continues to manage it with an 18% stake. “We have been in touch with the Parikh family lately. We are trying to find a way to settle the issues amicably,” said Emami’s chairman R.S. Agarwal.
“We have been talking, but they haven’t made any firm offer as yet. We have no further comments to make on this issue,” said Zandu’s managing director Girish G. Parikh.
Last month, Emami, a Kolkata-based conglomerate with interests in fast moving consumer goods and real estate, acquired a 24% stake in Zandu from one of the company’s founders, the Vaidya family, and launched an open offer for acquiring 20% more of the company’s shares. Added to the 3.5% stake it had earlier acquired through share market transactions, its current holding in Zandu is 27.5%.
The Parikh family had said the deal was struck without its knowledge and Emami had admitted that it hadn’t spoken to the Parikhs until after buying out the Vaidya family’s stake.
The 54.5% of the company’s equity that isn’t held by Emami or the Parikh family is owned by the public and some investment companies. An arm of Cadilla Healthcare Ltd, Pripan Investments Pvt. Ltd, owns 3.35% in Zandu.
Emami director Harsh Agarwal had earlier said his company was willing to pay a premium to the Parikhs for their 18% stake. Asked about the ongoing negotiations, he added: “Nothing has emerged so far. So we don’t want to speculate (on) what’s going to happen.”
Meanwhile, Zandu’s share price has soared after Emami announced its unsolicited takeover bid. While the Vaidya family sold out for Rs6,900 per share and Emami priced its open offer at Rs7,315 a share, Zandu’s shares zoomed past Rs15,000 on the bourses before cooling off a bit and closing at Rs14,136.85 each on Friday on the National Stock Exchange, 5% lower than Thursday.
R.S. Agarwal ruled out acquiring Zandu’s shares at the current market price. “We stand by the price we have offered (Rs7,315). We are certainly not buying at the current market price of Zandu’s shares,” he said.
Zandu’s current market capitalization of Rs1,140 crore is about six-and-a-half times its Rs173 crore sales in 2007-08. Its current market price— Rs14,136.85—reflects a price earnings (per share) ratio of 69 times, making the company an expensive buy.
Time is running out for the Parikhs to make a counter bid. They have till 23 June, or Monday, to do so. Asked if the Parikh family was contemplating a counter bid, Girish Parikh said that he didn’t want “to discuss our strategy in public”.
Earlier this month, Zandu had proposed to offer shares to its promoters on a preferential basis. The proposal had come up for discussion at the board meeting on 6 June, but was dropped because independent directors on the company’s board opposed the move.
Emami, too, had shot a legal notice to Zandu’s board opposing the move because it saw it as an attempt by the Parikh family to raise its stake in the company.
Emami brands include Boroplus antiseptic cream and prickly-heat powder, Navratna oil and cool talc and Fair & Handsome skin cream for men. Zandu makes products, including energy supplements, herbal medicines and pain balms under its brand name.