Even as the corporate battle for control over Fame India Ltd hots up, minority shareholders can use the tussle to secure their gains. The shares have vaulted from Rs51 to Rs87.6, according to the National Stock Exchange, in just a fortnight. Fame’s shares, which were quoting at about Rs30 until end-December 2009, moved up to Rs44 by 2 February when Inox Leisure Ltd acquired about 43% of Fame. Later the shares moved in tandem with Inox’s purchase of another 7% of Fame’s equity at around Rs51 apiece, followed by an open offer to the public to buy a 20% stake at Rs51.
In a new twist to the tale, Reliance MediaWorks Ltd, or RML, (formerly Adlabs Ltd) has put a spoke in the Inox-Fame deal by making a counter bid for 53% of the equity at Rs83.4 per share. This move, which will cost RML around Rs180 crore, has seen Fame’s share price move up in the last two trading sessions.
Why is RML making a hostile bid? Is it just playing spoilsport in a game that saw Inox win the race to pick up about a 51% stake in Fame so far? A more plausible reason could be RML’s intent to monopolise the multiplex business, which has been seeing consolidation in the past six months. The Inox-Fame combine with 55 multiplexes and 204 screens at present is a close second to RML with 429 screens, and a strong presence in both the eastern and western geographies.
Also, RML holds about 10% in Fame at present, and may get around 26% through its offer, which will also make it an active participant on the board. According to Jayant Thakur, chartered accountant: “With 26%, the shareholder can block special resolutions and weigh on significant corporate decisions.”
However, shares of RML closed lower Monday at Rs217. As of 31 March 2009, its total debt was around Rs1,215 crore on a net worth of around Rs555 crore. The company continues to make a net loss. On the other hand, Inox shareholders could keep their fingers crossed that the Inox open offer for Fame is successful.
Besides, media analysts state that at the first block deal, the company’s cost worked out to about Rs2 crore per screen, which is lower than the replacement cost.
Even as the two companies battle, Fame shareholders could do well by exiting. If RML’s attempt does not succeed, they would have to contend with Rs51 a share in the Inox open offer. That could see the share price fall from the current levels of Rs88.
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