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Ravi Ranjan Prasad

Mumbai, Aug. 23 The recent delay in the high profile open offer for Ranbaxy shares by Japanese drug major Daiichi Sankyo might appear routine, with the Securities and Exchange Board of India taking a little more time than expected to complete scrutiny of the offer.

But quite a few offers have had to undergo a revision in schedules.

An analysis of 11 major open offers since the beginning of 2008 indicates that in eight cases there has been postponement of commencement of the offer by one week to three months. Two were on schedule, while one was brought forward by one week.

In open offers, the schedule of activities gets triggered the day the public announcement is made. However, a delay in SEBI clearance throws things out of gear because once the public announcement date is known, the rest of the steps are required to be taken in arithmetic precision as prescribed in the SEBI regulations.

In nine of these 11 open offers, the activities had to be revised because SEBI’s observations on the draft offer documents were pending.

Idea Cellular’s open offer for Spice Communications and Emami’s for Zandu Pharma have currently been stalled pending SEBI approval.

The eight companies where open offer dates have been revised include that for Spice Communications (by Idea Cellular, for Zandu Pharma (Emami), for Ranbaxy (Daiichi Sankyo), for Infomedia (TV 18 India), for Aztec Software (Mindtree Consulting), for Hindustan Oil Exploration (ENI UK Holding), for Camphor & Allied (Oriental Aromatics), and for Dabur Pharma (FresiniusKabi).

In seven of these cases the open offer dates were postponed and only in one case (Aztec Software) was the open offer revised to an earlier date.

In the most recent case - of Ranbaxy’s open offer by Japanese company Daiichi Sankyo - the offer date had to be revised pending SEBI approval, but the merchant bankers termed it a routine affair.

A spokesperson for Lazard India Pvt Ltd, merchant bankers for Idea Cellular said: “SEBI has not provided us their final comments. Once that is done, we would get the same included in the Letter of Offer.”

In these 11 cases, two of them - BOC India and BASF India - involved consolidation of the promoters’ current holdings, while the rest involved change in management control.

It is also important to take note that five of the 11 cases where the takeover process is getting revised, involved a foreign entity (Daiichi Sankhyo, ENI UK Holding, FresiniusKabi, HSBC). In the case of Idea Cellular too, Telecom Malaysia’s subsidiaries are persons acting in concert with the AV Birla group).

Delays in open offers also call for a re-look at the revision of the price offered.

In fact, in the case of BOC India’s open offer which was delayed by close to three months, the acquirer BOC Group (here promoters themselves were consolidating their holdings) announced an upward revision of the open offer price from Rs 165 per equity share to Rs 200 per share.

“The revision in open offer price depends on individual cases and circumstances,” said a merchant banker. In a falling market there is a likelihood of the acquirer spending less in the event of postponement.

The post-offer status of six of these presents a mixed picture of the subscription levels and the cost of acquisition incurred by the acquirer. Fifty per cent of them were not fully subscribed.

In the Infomedia open offer by TV 18, just 3.65 per cent stake was acquired while the proposed offer was for over 26 per cent stake. With BOC India, it was 15.49 per cent stake ( 20 per cent) and in the Dabur case, 17.62 per cent (20 per cent).

More Stories on : Corporate | Open Offers | Regulatory Bodies & Rulings

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