Mumbai: Shares of Fame India Ltd rose nearly 5% to close at Rs86.45 apiece on the Bombay Stock Exchange, a day after Reliance MediaWorks Ltd offered to buy a controlling stake in the Mumbai-based cinema chain operator, pitting its offer against that of Inox Leisure Ltd.
Since 8 February, when the tussle over Fame broke out, its shares have shot up 54.5% while Inox and the Sensex have increased by nearly 2%. Reliance MediaWorks has lost 5.5% in the same period.
Reliance MediaWorks offered to buy a 62.10% stake in Fame at Rs83.40 a share over the weekend, a 63.5% premium to the Inox open offer of Rs51 per share. If Inox decides to take advantage of this, it stands to gain as much as Rs67-68 crore—or three times Inox’s 2008-09 profits—estimated an analyst at a Mumbai-based brokerage.
House full: A Fame cinema hall in Mumbai. Since 8 February, when the tussle over the chain broke out, its shares have shot up 54.5%. Shekhar Roy/HT
“The Reliance offer is such that it puts very uncomfortable choices before Inox. Either it sells its stake and gets out. If it decides not to, then it either has to raise its offer price, which makes the acquisition rather expensive or live with a big minority shareholder on its back,” said another city-based analyst with a domestic brokerage who did not want to be named.
The open offer of the film-making and distribution unit of the Reliance - Anil Dhirubhai Ambani Group, or R-Adag, will run concurrently with the Inox offer from 1-20 April.
As Inox has acquired a 50.5% stake in Fame, the R-Adag firm cannot get a controlling stake unless Inox sells at least part of the holding.
Crossing the 26% threshold will give Reliance MediaWorks a board seat, said the analyst quoted above, explaining “this could mean hostilities within the resultant top management. We don’t like the idea of managements with different ideological stances in one board.”