Zandu promoters give in, decide to sell their entire stake to Emami

Zandu promoters give in, decide to sell their entire stake to Emami

Kolkata: After staving off a hostile takeover for more than four months, the Parikh family, co-founders and promoters of herbal health care firm Zandu Pharmaceutical Works Ltd, has agreed to sell its stake to personal care products maker Emami Ltd.

The decision came on the last day of Emami’s open offer for 20% of Zandu, after it bought a 24% stake in the company from co-founders, the Vaidya family, late in May.

“This is a big acquisition as far as Emami is concerned, and it would add value to the company," the company’s chairman R.S. Agarwal said. “We are buying from them (the extended Parikh family) around 37-38%, some of it through the open offer and the rest through negotiation."

The Parikhs have agreed to sell their stake at Rs16,500 per share, or for Rs530-550 crore, and step down from Zandu’s board after the acquisition is completed, which could take about two months, Agarwal said.

Girish Parikh, Zandu managing director and a key promoter, declined to comment on Wednesday’s development.

Emami, which currently owns a 27.5% stake in Zandu, will gain control of around 65% of its shares after the buyout.

“The investors will definitely be looking for a change in the management as they believe that a new management would bring in positive changes, which Zandu lacked for some time now," said Arun Kejriwal, founder of the Mumbai-based Kejriwal Research and Investment Services (P) Ltd.

Zandu shares have gained 76.65% since 30 May, when the Vaidya family sold its stake to Emami. On Wednesday, Zandu shares fell 5% to close at Rs14,357.05 on the Bombay Stock Exchange, or BSE, while the benchmark Sensex index lost 5.87% to end at 10,809.12 points.

Emami had raised its open offer price twice—from Rs7,315 to Rs15,000 on 15 September and to Rs16,500 on 3 October.

Before striking a deal with the Vaidyas at Rs6,900 a share, Emami had bought 3.5% of Zandu’s shares from the market.

Zandu Pharma, founded 98 years ago, was co-founded by the Mumbai-based Parikh family and the Vaidyas, who were partners in the company for more than nine decades.

The Parikhs, led by Girish Parikh, put up a fight, moving markets regulator Securities and Exchange Board of India and later the Company Law Board, disputing the acquisition of Zandu shares by Emami.

The family also tried to shore up its holding in the company by buying shares from the market.

On 8 October, Zandu said in a stock market filing that the extended Parikh family had a consolidated 35.73% stake in the company.

“Till now, the focus was on chalking out a strategy to buy the company. Now, we have to see how to turn it around," said Agarwal.

In preparing the ground for the takeover, Emami sought shareholders’ approval at a meeting on 3 October for investment of up to Rs430 crore for purchasing Zandu shares.

Emami had also won approval to increase its borrowing limit to Rs1,500 crore from Rs500 crore.

Emami, in a filing with BSE, also said it has been using inter-corporate deposits from its other ventures such as real-estate consortium South City Projects Ltd and Emami Realty Ltd to fund the buyout.