BackVijay Mallya gets to keep control of Mangalore Chemicals
Deepak Fertilisers received around 6 million shares of Mangalore Chemicals compared with its total bid for 30.8 millon shares
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Kolkata/Mumbai: The two competing tender offers for the shares of Mangalore Chemicals and Fertilizers Ltd concluded on Monday with Deepak Fertilisers and Petrochemicals Ltd receiving around six million shares compared with its total bid for 30.8 millon shares. This means the incumbent management led by UB Group chairman Vijay Mallya gets to keep the farm input maker under his control, for now.
Though Pune-based Deepak Fertilisers had valued Mangalore Chemicals at an impressive 15.2 times its 2013-14 net profit and offered ₹ 288 crore to the minority shareholders to amass a controlling stake in the company, its bid for 26% of the company’s shares was trumped by a sudden spurt in the market price of the company’s stock following the final revision of offer price to ₹ 93.60 a share at the end of September.
Mallya, who had joined forces with Kolkata-based industrialist Saroj Kumar Poddar to launch a counter bid at ₹ 81.60 a share, received only about 40,000 shares.
Deepak Fertilisers has acquired through the open offer at least 5.5% of the company’s shares, according to people familiar with the details. Shares tendered in the physical form were still being counted but it is unlikely that its total acquisition through the tender offer will exceed 10% of Mangalore Chemicals’s total outstanding shares, said these people asking not to be named in view of regulatory restrictions.
The Mallya-Poddar combine controlled 38.4% in Mangalore Chemicals while Deepak Fertilisers owned only 25.3% before the open offer. Only a little over 36% of Mangalore Chemicals’ shares were widely held.
Under Indian laws, Deepak Fertilisers can continue to increase its stake in the firm by 5% every year by buying shares directly from the market. It cannot make another open offer until a year later.
The Pune-based firm’s tender offer opened for subscription on 1 October. Under Indian laws, it was barred from acquiring shares directly from the market after it had revised the offer price on 26 September. Mangalore Chemicals’s shares on that day jumped 19.95% to ₹ 88.10, forcing trading to be halted.
It raced to a 52-week high of ₹ 104.65 on BSE on 8 October and traded firmly above ₹ 100 for several days before settling around ₹ 94-95 in the past few days.
On Monday, the shares gained ₹ 0.75, or 0.79%, to close at ₹ 95.75 on the BSE.
A lot of things happened while tender offers were open for subscription, said Arun Kejriwal, director of Kejriwal Research and Investment Services Pvt. Ltd, an advisory. “I urge the capital market regulator to look into this matter."
Shareholders who cashed out to Deepak Fertilisers are ones who had bulk holdings, such as Karnataka State Co-operative Marketing Federation Ltd, which held 2.7 million shares, or a 2.28% stake in Mangalore Chemicals. The management of the co-operative couldn’t be reached for a comment, but people familiar with its decision confirmed that it had sold out.
A close associate of Poddar said the incumbent management wasn’t apprehensive of Deepak Fertilisers acting as a stumbling block in running Mangalore Chemicals. “Its equity ownership in Mangalore Chemicals allows it to block special resolutions, but if it is in the best interest of shareholders to pass such resolution, I am sure Deepak Fertilisers will back the management," said this person, asking not to be identified.
Poddar, according to this person, is willing to buy Deepak Fertilisers out when laws allow the Pune-based firm to cash out.
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