Deepak Fertilisers may give up hostile bid for Mangalore Chemicals

Kolkata/Mumbai: Deepak Fertilisers and Petrochemicals Corp. Ltd’s recent sale of 2.6 million shares in UB Group-promoted Mangalore Chemicals and Fertilizers Ltd (MCFL) has triggered speculation that the Pune-based company has given up its hostile acquisition bid for the UB Group company. Deepak’s stake in Mangalore Chemicals has now dropped to 29.05%.

Fuelling the speculation is Deepak Fertilisers’ statement that it will not make a counter bid to the Adventz Group’s latest voluntary open offer for 36.56% of Mangalore Chemicals.

In a filing to the exchanges on Friday, Deepak Fertilisers said it sold 2.2% of Mangalore Chemicals in December, in nine different open-market transactions.

“I am not sure there is any reason behind this speculation. We are not considering cashing out at this moment,” a senior executive at Deepak Fertilisers said on condition of anonymity.

Shares of Mangalore Chemicals lost 0.33% to close at ₹ 89.70 each on Monday on BSE, while the exchange’s benchmark Sensex fell 0.16% to close at 27,842.32 points. Shares of Deepak Fertilisers gained 2.38% to close at ₹ 146.50 apiece.

Kolkata-based industrialist Saroj Kumar Poddar’s Adventz Group came to the defence of the UB Group in April 2012 after Deepak Fertilisers launched a hostile takeover bid for Mangalore Chemicals.

After a bidding war ended in October, Adventz Group firms Zuari Fertilisers and Chemicals Ltd and Zuari Agro Chemicals Ltd made a voluntary bid in December to raise their stake in Mangalore Chemicals. The UB-Adventz Group combine currently owns around 38% of Mangalore Chemicals.

On 30 December, Poddar’s firms raised the size of their offer from 25.9% to 36.56% of Mangalore Chemicals’ share capital. The move was seen as an invitation to Deepak Fertilisers to cash out. At the offered price of ₹ 91.92 apiece, the Adventz Group has committed to spend up to ₹ 398 crore to acquire shares through the open offer.

“It is apparent that Deepak Fertilizers will sell its shares in the open offer; otherwise why did it sell a small stake last month?”asked a top executive at the Adventz Group who asked not to be identified. There has been no formal discussion between the two companies yet, this person added.

“The offer size was revised upwards precisely to give all shareholders, particularly Deepak Fertilizers, an exit route,” he said.

There is no scope of any deal with Deepak Fertilisers beyond the open offer as Zuari is barred by the markets regulator from buying more than 5% from the market through the so-called creeping acquisition route, this person said.