Business Daily from THE HINDU group of publications
Monday, Sep 10, 2007
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Business Daily from THE HINDU group of publications Monday, Sep 10, 2007 ePaper |
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Tea Markets - Investor Protection Corporate - Open Offers
Rs 140 is price co. paid for buying shares from promoter shareholders. SEBI says it must include price paid as non-compete fee.
Our Bureau Mumbai, Sept. 9 Tata Tea’s open offer to public shareholders of Mount Everest Mineral Water (MEMW) continues to be stuck on the question of determining the ‘offer price’ for the shares. The merchant banker DSP Merrill Lynch, handling the open offer on behalf of Tata Tea, contends that it should be Rs 140 per share. This is the price Tata Tea paid for the purchase of shares from the promoter shareholders as also in the preferential offer made to them by the company. But SEBI, according to a public announcement made by the merchant bankers, has contended that it should also include pro rata the amount paid by Tata Tea to the promoter shareholders as compensation for not engaging in mineral water business in competition with MEMW, after Tata Tea’s acquisition of management control of the company. Tata Tea had paid, in the aggregate, a sum of Rs 3 crore as non-compete fee in terms of a separate agreement entered into with Mr Vinod Sethi, Foresight Holdings Pvt Ltd, principal shareholders, and Mr Salim Govani, Managing Director. Inclusion of this sum could add roughly Rs 10 per share to the offer price. The choice before SEBI boils down to an evaluation relative to the merits of two conflicting positions. One, the commercial value placed upon officials/promoters’ business knowledge acquired in the course of managing the affairs of a company rightly belongs to the company. As such the compensation paid to them is part of the value pool of the shares of the company. This is implicit in the fiduciary responsibility that managers carry vis-a-vis public shareholders. On the other hand it could also be argued that the commercial value assigned to the intellectual property implicit in a manager’s business knowledge is outside the scope of his/her fiduciary responsibility towards public shareholders. In the event, the monetary value of such knowledge should rightly be regarded as their exclusive personal property. The position does not change even if the transaction of monetisation of their intellectual know-how is a linked transaction of the sale of shares held by them in the company.
Related Stories: Tata Tea open offer for Mount Everest from July 27 Tata Tea buys 24% stake in Mount Everest for Rs 110 cr Tata Tea eyes stake in Mount Everest? More Stories on : Tea | Investor Protection | Open Offers | Tata Tea Ltd | Water
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