The Securities and Exchange Board of India (SEBI) has approved the joint open offer for Mangalore Chemicals and Fertilizers (MCF) by Zuari Agro Chemicals and the UB Group, Business Standard reported today .
The move will come as a breather for beleaguered industrialist Vijay Mallya, whose firm was under a hostile takeover attempt by rival Deepak Fertilisers .
Zuari, MCF and Deepak all operate in the fertilizer business.
On April 23, Deepak inched its stake in MCF to a little over 25 percent, after which it came out with an open offer (at a price of Rs 63 per share), which becomes mandatory upon crossing the threshold, in a bid to acquire another 26 percent.
In order to thwart the takeover attempt, MCF's existing promoter Mallya -- whose group has been facing a severe financial crunch in the fallout of the Kingfisher crisis -- teamed up with Suraj Poddar's Zuari to issue a rival open offer at a higher price of Rs 68.55 per share.
However, SEBI had recently sought clarification from both the rival groups, following which the joint bid has been approved, as the existing promoters of MCF (UB) and Zuari have been considered as "persons acting in concert".
Zuari owns 16.43 percent stake in MCF while Mallya's UB Group owns 22.91 percent though half of its shareholding is pledged.
The battle for control for MCF, a high-margin firm, has heated upon over the past few months after Deepak entered the fray at a time it was clear Mallya would not be able to defend his firm against a hostile takeover.
But in "dear friend" Suraj Poddar (chairman of the Zuari Group), who has made clear his he would not forcibly seek control of MCF, the battered Mallya has found a white knight to stave off Deepak's challenge.
The joint bid for MCF clearly favours Mallya who, as per terms, will remain chairman for at least five years and can appoint three board members, compared to one for Zuari. Mallya also has the right of first refusal in case Poddar decides to sell his stake.
The MCF bid has also tested the friendship of the flamboyant Mallya and the 68-year-old Poddar, and which dates back to UB patriarch Vittal Mallya (Vijay Mallya's father).
Initially, after Poddar ended up acquiring 10 percent in MCF (via lenders such as SBI) and signaling he was open to a takeover, he said he would sell his shares back to Mallya if he was not interested in selling out.
But after Mallya repeatedly delayed in coming up with funds required to buy back the stake, Poddar had threatened to sell the shares to whoever was willing to buy, following which Mallya rushed to placate him and made him come about to mount a joint bid against Deepak's attempt.
Zuari Agro Chem stock price
On July 21, 2014, at 14:07 hrs Zuari Agro Chemicals was quoting at Rs 183.00, down Rs 0.45, or 0.25 percent. The 52-week high of the share was Rs 217.00 and the 52-week low was Rs 73.50.
The company's trailing 12-month (TTM) EPS was at Rs 6.22 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 29.42. The latest book value of the company is Rs 195.07 per share. At current value, the price-to-book value of the company is 0.94.
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