Mumbai: Anil Ambani’s film-making and distribution firm Reliance MediaWorks Ltd has challenged a recast of the board of directors at cineplex chain Fame India Ltd, firing the latest salvo in its intense takeover battle with Inox Leisure Ltd.
Reliance MediaWorks wrote a letter to the chairman of capital markets regulator Securities and Exchange Board of India (Sebi), protesting the appointment of three new directors on the board at a time when competing open offers for Fame India have been made.
Reliance MediaWorks CEO Anil Arjun demanded that the appointments be set aside under various sections of Sebi’s takeover code to protect the interests of Fame India shareholders, Reliance MediaWorks and the securities market.
On Sunday, Fame India had appointed Kishore Biyani, chairman of Future Group that runs Pantaloon Retail (India) Ltd, as an independent director. The other two appointees were Deepak Asher and Pavan Jain, existing directors on the board of Inox Leisure.
Reliance MediaWorks, India’s largest cinema hall chain, had made an offer on 21 February to acquire 21.6 million shares, or a 62.08% stake in Fame India, at Rs83.40 apiece, a hefty premium to Inox Leisure’s offer of Rs51 a share.
Reliance MediaWorks’ offer will be open from 1-20 April, the same time as Inox’s offer.
Inox Leisure had made an open offer to buy 20% from public shareholders after acquiring a 50.49% stake in Fame India in two transactions—first by buying 43.28% from Shravan Shroff, Fame India’s managing director and promoter, and purchasing an additional 7.21% from the market.
Reliance MediaWorks has a 12.2% stake in Fame India.
In its letter to Sebi, Reliance MediaWorks said Inox directors would be privy to confidential information about Fame India, which is not available to it, and the competing offers would, therefore, be between unequal parties.
It would be difficult to remove these directors in case the open offer by Reliance MediaWorks is successful, argued the letter, a photocopy of which was reviewed by Mint.
It also pointed out that Sunday’s appointments were made when there was a pending complaint with Sebi by Reliance MediaWorks on the “fraudulent acquisition” of shares and control of Fame India by Inox Leisure, when a competitive bid on superior terms and higher price compared with Inox’s offer, had been made for the firm.
Reliance MediaWorks’ Arjun said Fame India’s original directors should have been neutral and exercised independent judgement in appointing new directors from Inox Leisure before the completion of both the open offers, while giving fair treatment and opportunity for competing acquirers.
A senior Inox official declined to comment on the letter written to Sebi.
Fame India’s Shroff did not respond to calls or text messages sent to his cellphone.
A Reliance MediaWorks spokesman confirmed that the company had written a letter to Sebi, but declined to comment further.
The appointment of the three directors to the Fame India board, according to Reliance MediaWorks, is in breach of the fiduciary responsibilities of Fame India directors, who, it said, had not acted in the best interests of the company and its minority shareholders.
Inox Leisure shares gained 2.98% to close at Rs72.55 apiece on the Bombay Stock Exchange on Wednesday even as the exchange’s benchmark Sensex index rose 1.36%. Fame India stock fell 1.61% to Rs85.50 and Reliance MediaWorks rose 1.4% to Rs221.50.