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Godrej Agrovet will make an open offer to buy an additional stake of up to 26 per cent in Astec LifeSciences from minority shareholders at ₹246 a share.
On Saturday, the agri-business company of Godrej Industries Ltd said it will buy 45.29 per cent stake in agrochemicals and pharmaceutical intermediates firm Astec LifeSciences Ltd from its promoters at a price of ₹190 a share. The price paid to promoters of Astec LifeSciences is at a huge discount to the prevailing market price of ₹242.25 on the NSE.
Explaining the discounted pricing, Balram Singh Yadav, Managing Director, Godrej Agrovet, told BusinessLine that the deal was negotiated over the last several months and the price was based on last fiscal earning, while the current market price factors 2015-16 earning potential.
“The stock price has rallied only in the last two months based probably on first seven months financial performance of the company. If you see the period before July it was trading around ₹190 a piece,” he said. Proxy advisory firms said they were not worried with the discounted pricing. JN Gupta, Managing Director, Stakeholder Empowerment Services, said the price of Astec shares did a quantum jump from July 9 to July 20, from about ₹185 to nearly ₹300. Over the same period, trading volumes rose from 51,000 a day to about eight lakh. “This pattern may need to be investigated as it could indicate buying by informed persons,” he said.
Hetal Dalal, Chief Operating Officer, Institutional Investor Advisory Services, said though the open offer will allow minority shareholders to tender their shares at a market-driven price, it is difficult to say how the stake sale will impact Astec’s share price.
Godrej’s Yadav said, “As per the open offer, we will be glad to buy up to 26 per cent from minority shareholders. We would not hazard a guess on market response for the open offer.”
Yadav said that the acquisition is a backward integration for Godrej. “Astec, a business-to-business company, sells its molecules and ingredients in bulk to other manufactures and also does contract manufacturing. Consumer facing Godrej will have a steady source raw material,” he said.
On the possibility of merging Godrej Agrovet with Astec for listing on the exchange, Yadav said there are no such plans in the near future and the company can raise its own growth capital as its debt equity is still below one. Godrej Agrovet intends to spend ₹300 crore over next three years and will open a new animal feed mill in Bihar next month.
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