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Sunday, Apr 24, 2005

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Century Enka: Reject

Shanthi Venkataraman

INVESTORS can reject the offer made by the acquirers of Century Enka, as the price is unattractive.

The price which, including interest, amounts to Rs 114, is well below the current market price of Rs 142. CVC Capital Partners, which mainly invests in equities and provides advisory services, had displayed an interest in the fibres division of Akzo Nobel, which consists of several companies, including Century Enka.

Consequent to its acquisition, it has indirectly acquired a 38 per cent stake in Century Enka. As a result, SEBI has directed the acquirers to make an open offer for an additional 20 per cent stake. The acquirers, however, have clarified that they view their stake in the company as purely an investment. The BK Birla group would continue to manage the affairs of Century Enka. The latter makes polyester filament yarn (PFY) and nylon filament yarn. It also operates in a relatively untapped market; it produces nylon industrial tyrecord and tyrecord fabrics, which find application in the tyre industry.

Expansion of its nylon tyrecord yarn and fabric facilities is also underway. The additional capacities would help it compete more effectively against low-priced imports. Margins are, however, likely to remain under pressure, as prices of inputs for polyester, which are linked to crude prices, are likely to remain firm.

Offer details: The offer closes on April 29. The last date for withdrawing the offer is April 26. JM Morgan Stanley is the manager to the offer and MCS is the registrar.

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