Home / Companies / Zuari set to get control of Mangalore Chemicals

Kolkata: Capping a two-year takeover battle, Zuari Fertilisers and Chemicals Ltd, one of India’s biggest farm input makers, is set to acquire majority control of UB Group firm Mangalore Chemicals and Fertilizers Ltd.

Zuari’s open offer for 36.56% of Mangalore Chemicals’ shares, which ended on Wednesday, was oversubscribed with 44% of the target company’s shares being tendered, said a Zuari executive who did not want to be identified.

In a fortnight when the shares received under the open offer are transferred to it, Zuari’s stake in Mangalore Chemicals will rise to 53%, making the latter a subsidiary, according to this person.

Under Indian laws, Zuari can only buy as many as 43.32 million shares, or 36.56% of Mangalore Chemicals’ paid-up equity, and not all the shares tendered under the open offer.

Zuari offered 91.92 a share, or around 400 crore in total.

“It is indeed a big day for us," said the Zuari executive.

Back in April 2013, Zuari acquired 9.72% of Mangalore Chemicals’ shares, launching a pursuit for greater control of the UB Group firm. In about three months, Deepak Fertilisers and Petrochemicals Corp. Ltd launched a rival bid, triggering a fierce takeover battle.

Eventually, Deepak Fertilisers bowed out last month when it sold a substantial part of the 31.25% stake it had amassed in Mangalore Chemicals. Most of these shares, which were sold in the open market, wound through market operators into Zuari’s open offer.

What tipped the scales in favour of Zuari was UB Group chairman Vijay Mallya’s support to its offer. In return, Zuari has agreed to grant him representation on the Mangalore Chemicals board—a price that Deepak Fertilisers had refused to pay, executives of the Pune-based firm previously said.

Zuari had indicated that it could seek restructuring of the Mangalore Chemicals board if it could secure majority control in the company.

However, it isn’t immediately known how Zuari will leverage its majority control to gain a greater sway over the company’s operations.

To be sure, Mallya has already stepped down as chairman of Mangalore Chemicals.

But on the combined strength of the UB Group’s 22% stake in Mangalore Chemicals and an agreement with Zuari, he continues to have representation on its board.

Both Zuari and the UB Group have a right to appoint a director each to the Mangalore Chemicals’ board, according to disclosures made in the open offer document.

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