The Hindu Business Line : Blue Dart - Delisting offer: Avoid

With prospects in the logistics space looking promising, we believe shareholders should be in no rush to move out of the Blue Dart, one of the sector's better plays.

Two more planes added to fleet
A good proxy on economic growth

Worth holding on to.

Shareholders of Blue Dart Express (BDE) need not participate in the delisting offer announced by DHL Singapore Private Limited (the acquirer). The floor price is Rs 510.94 and the acquirer is willing to offer up to Rs 550 per share to mop up Blue Dart's residual shareholding.

With the stock trading at a 10 per cent premium to the offer price and prospects in the logistics space, in which BDE is a key player, appearing bright, shareholders would be better off giving the offer a skip.

We have been confident about Blue Dart's prospects, against the backdrop of robust economic growth, a leading indicator of trends in cargo traffic. With a network spanning both surface and air transport, Blue Dart, in our view, is best positioned to take advantage of the strong demand.

Blue Dart continues to make investments to bolster its offerings, as is borne out by its recent acquisition of two freighter aircraft in June. In the latest quarter-ended September, revenue growth at close to 30 per cent remained strong, though earnings were disappointing on the back of an almost 50 per cent jump in freight and handling charges associated with the new acquisition.

The fall in the prices of crude oil and the cooling-off effect it has had on air turbine fuel charges should also benefit Blue Dart. We expect traction on the earnings front in the quarters to follow.

The delisting procedure

Delisting would take place through the reverse book-building route, which is similar to what is being followed in the case of initial public offerings. Blue Dart's shareholding pattern reveals that out of the 19 per cent of equity outstanding, about 65 per cent is held by mutual funds and private corporate bodies and the rest by individual and NRI shareholders.

Under the circumstances, we believe institutional investors will play a crucial role in determining the exit price, as they tend to bid more rationally. In this backdrop, we outline two scenarios; in either case, shareholders would not lose out on liquidity.

If the acquirer does accept the exit price determined through the book-building route and decides to delist the company (assuming the shares acquired go past the delisting threshold, which, in this case, is likely to be 90 per cent), the same exit price would also be applicable to other shareholders for six months.

Shareholders who bid higher than the exit price as well as those who refrained from participating in the offer initially could utilise this time window to exit the stock.

In the event of the acquirer failing to mop up an adequate number of shares to pursue the delisting option, the proposal would fail and Blue Dart would continue to remain a listed entity.

Offer details

The acquirer is making an offer to buy out the remaining 45-lakh shares of Blue Dart and delist the company. DHL's initial stake of 68 per cent in Blue Dart went up to its current level of 81 per cent after its open offer in early 2005 was partially successful; this has, in turn, led to the delisting offer. Ambit Corporate Finance is the manager to the offer, which opens tomorrow and closes on November 8.

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