Emami sweetens open offer for Zandu shares

Emami sweetens open offer for Zandu shares

Kolkata: Personal care products maker Emami Ltd said on Friday it would pay Rs16,500 per share for 20% in Mumbai-based herbal health care firm Zandu Pharmaceutical Works Ltd—raising its offer for the second time in less than three weeks.

On 15 September, Emami, which already owns 27.5% in Zandu, had raised its offer from Rs7,315 to Rs15,000 a share. Emami’s open offer for 20% of Zandu was triggered by its acquisition of a 24% stake from the Vaidya family, founders of the firm.

If fully subscribed, the open offer would cost Emami Rs266.11 crore. The offer opened on 26 September and would close on 15 October.

The decision to raise the offer price indicates that Emami has struck a deal with large shareholders of Zandu. Some 56 individuals own 21.5% of Zandu, according to the company’s filings with the stock exchanges. In addition, 274 companies—mostly privately held—own 34% of Zandu’s shares.

“We expect shareholders to start making commitments now," Emami chairman R.S. Agarwal told Mint, admitting that the offer price was raised based on feedback from Zandu’s shareholders.

“Emami has always rewarded its shareholders handsomely, and we wanted to demonstrate that to shareholders of Zandu as well," Agarwal said.

Zandu’s shares jumped 4.63% on Friday to close at Rs15,960 on the Bombay Stock Exchange, or BSE, while the bellwether Sensex index fell 4%. Emami’s shares fell 4.7% to close at Rs273 on BSE.

The management of Zandu, led by the Parikh family—co-founders of the company—are fighting to stave off Emami’s takeover bid. They ramped up their holding in Zandu to 20.19% by buying shares from the market and moved the Securities and Exchanges Board of India, or Sebi, and the Company Law Board, or CLB, challenging the acquisition.

While Sebi cleared the open offer, CLB asked the two managements to resolve the dispute between themselves.

Agarwal said discussions with the Parikh family had started. “The fight between us is over. Now we are now in a recovery period," he said. Calls made to Girish Parikh, managing director of Zandu, weren’t answered or returned.

Emami, according to its chairman, had offered to acquire the 20% stake owned by the Parikh family. Because they did not agree to sell out, Emami wanted representation on Zandu’s board.

Emami opposed Zandu’s move to induct new directors on its board, but the latter couldn’t eventually hold its annual general meeting as a group of shareholders moved two courts and obtained an injunction.