Tube Investments of India Ltd (TIIL), belonging to the $4.4-billion (Rs 22,000 crore) Murugappa Group of Chennai, has initiated the process of making a public offer to acquire up to 2.12 crore shares of Shanthi Gears Ltd, Coimbatore, by making a Detailed Public Statement in the media.

TIIL has struck a deal to buy out the 44.12 per cent stake held by the promoter’s group in SGL at Rs 81 per share for 3.60 crore shares valued Rs 292 crore. The public offer is made at the same price.

The DPS issued by Enam Securities Pvt Ltd (‘Manager to the Offer’) to the SGL shareholders said the acquirer was making an open offer to acquire up to 2,12,46,122 equity shares of Re 1 each representing in aggregate 26 per cent of SGL’s share capital at Rs 81per share payable in cash. On completion of the open offer and after full acceptance of the shares offered, TIIL would hold a maximum of 5,72,96,413 equity shares constituting 70.12 per cent of the equity capital of SGL.

Publication of the DPS marked the beginning of the open offer process. The letters of offer would be dispatched to shareholders by August 29, 2012. The offer opening date would be September 5 and would close on September 18. The final report would be submitted to SEBI on October 8.

It was stated that TIIL proposed to appoint its nominees as directors on the board of directors of SGL 15 working days from the date of this DPS and the acquirer depositing cash equivalent to 100 per cent of the open offer consideration (assuming full acceptance) in the open offer escrow account. The total funds required for implementation of the offer (assuming full acceptance) for the acquisition of 2,12,46,122 f shares at Rs 81 per share worked out to about Rs 172.09 crore. The total cost of acquisition, including the promoter’s holding, would work out to Rs 464 crore.

Explaining the advantages of the acquisition to TIIL, the statement said it would aid the acquirer to ‘grow organically and inorganically’. TIIL believed that the target company was an ‘ideal synergistic fit’ since the product mix of both companies was ‘mutually exclusive’. SGL was one of the largest organised players in the gears segment, targeting more niche products and greater consumer retention. This also enhanced TIIL’s ‘ability to service other industry segments and reduce its reliance on the auto sector’ and help TIIL’s growth in value-added businesses.

Shanthi Gears Ltd's board of directors on July 20 approved the formation of a committee of independent directors comprising Mr M. Alagiriswamy, Mr C.G. Kumar, Dr D. Padmanaban and Mr M.J. Vijayaraaghavan to provide an independent assessment of the open offer and provide their recommendations to the shareholders within the timeframe and manner as specified under the SEBI (Substantial Acquisition & Takeover) Regulations, 2011, the company said in a communication to the stock exchanges.

(This article was published on July 21, 2012)
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