Photo: Mint
Photo: Mint

LIC makes open offer for 26% stake in IDBI

IDBI approved the proposal for issuance of preferential shares in favour of LIC to increase its share share to 51%

New Delhi: Life Insurance Corporation of India (LIC) on Thursday came out with an open offer for acquiring 26% of equity in IDBI Bank at a price of 61.73 per share, entailing total payout of over 12,602 crore.

Earlier in the day, IDBI Bank board approved the proposal for issuance of preferential shares in favour of LIC with a view to increase the share of insurer in the bank up to 51%.

LIC made a public announcement for the open offer to shareholders, including retailers, as per the Securities and Exchange Board of India (Sebi) regulations with regard to substantial acquisition and takeover of shares in a company.

LIC’s open offer is triggered after the government transferred 43% of its stake in IDBI Bank to the insurance company, which resulted in LIC’s holding rising to 51%. This essentially means the government will be left with around 43% stake, while public shareholders will hold 6% stake.

According to the open offer, LIC proposes to acquire more than 204 crore equity shares of 10 each, equivalent to 26% equity of IDBI Bank. This means LIC will have to buy at least 20% more from the government while the rest can be tendered by the public shareholders in the public offer.

The board of IDBI Bank approved the preferential allotment of equity shares to LIC aggregating up to 51% of post issue paid up capital of the bank, IDBI Bank said in a regulatory filing.

At a price consideration of 61.73 per equity, assuming full acceptance under the offer for 2,041,512,929 shares (or 26%), the total payable by the acquirer (LIC) will be 126,022,593,107, IDBI said in its latest filing on behalf of LIC. The offer price will be paid in cash.

“The board of directors of the target company (IDBI Bank) in their meeting held on October 4, 2018 have authorized the preferential allotment representing up to 51% of the fully diluted voting share capital (preferential issue) in favour of the acquirer (LIC) along with the acquisition control," it said in the filing.

The government has already approved the proposal of LIC to increase the stake in IDBI Bank.

IDBI Bank board on Thursday also approved increasing authorized capital of the bank from 8,000 crore to 15,000 crore. The meeting also cleared a proposal for re-classification of LIC as promoter of the bank post acquisition of 51% stake in IDBI Bank, it said.

The board also approved alterations in Articles of Association of the bank. Union cabinet on 1 August cleared a proposal for purchase of 51% controlling stake in IDBI by LIC.

Gopika Gopakumar in Mumbai contributed to this story.

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