The Hindu Business Line : ACC: Possibility of open offer

EXISTING shareholders of ACC can stay invested as there are interesting possibilities with regard to a possible open offer. Investors with high-risk preference can contemplate small exposures to take advantage of any favourable outcome on the open offer. This follows the move of the Securities Appellate Tribunal (SAT) to ask the Securities and Exchange Board of India (SEBI) to review its decision of `no open offer needed' in the Gujarat Ambuja-ACC case.

SEBI has now decided to take a re-look at the entire issue. It had initially ruled that an open offer was not triggered under the `change in control' of the takeover code when the Gujarat Ambuja group acquired the entire 14.4 per cent stake held by the Tatas in ACC. The Tatas enjoyed the status of promoters in ACC and had exercised management control till they sold the stake at Rs 370 per share when the market price was around Rs 130 per share.

The deal had been positioned as a strategic partnership. But SEBI has now been directed to examine whether de facto control is being exercised by the Gujarat Ambuja group (the SAT has opined that effective control can be exercised in many ways and majority stake was not the only way). In this backdrop, ACC shareholders need to keep the following scenarios which are possible :

The SEBI review could lead to its revising its opinion and ruling that the `change in control' clause is triggered and therefore an open offer is in the order of things. It may also require the open offer to be made at the price at which the Tatas stake was acquired. In quite a few MNC cases, SEBI has backdated required offer prices to the time global level changes that triggered change in control or the 15 per cent limit under the takeover code. But any SEBI decision to this effect may be challenged in higher legal forums and the process could be a long drawn out one. However, if at the end of it all, the open offer comes through, the returns may well be worth the wait. Given the turn of events, the Gujarat Ambuja group may not be able to take advantage of the takeover code and come out with an open offer at the market linked prices or through creeping acquisitions (as it would trigger the 15 per cent threshold for open offer) till the case is decided by SEBI and/or higher legal forums one way or the other.

There is the possibility that SEBI may change its decision but is over-ruled in higher legal forums.

The third possibility is that SEBI sticks to its original decision that an open offer is not required.

In the last two scenarios, the returns may not be attractive. But the downside risk is limited as the ACC stock will continue to carry a premium element for possible takeover as the Gujarat Ambuja group would hold only 14.4 per cent. It may have to lift its stake then by creeping acquisition or a market linked open offer (after SEBI's decision process and subsequent appeals if any is complete). The prospect for a hostile bid would also remain. In this backdrop, the ACC stock would continue to trade way beyond levels warranted by fundamentals and shareholders may have little to lose by being patient till the SEBI review process is over and much to gain if the first scenario plays out.

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