Shares of Alstom Group companies in India moved in opposite directions in the morning trade in the wake of open offer announcement to acquire shares from the public shareholders of its two Indian subsidiaries - Alstom India Ltd (AIL) and Alsom T&D India Ltd after the US engineering giant GE signed a binding agreement to acquire their French parent company Alstom.

While AIL shares were trading in the negative because of the huge lower valuation under the open offer compared to the market price, the other Alstom stock had gained marginally to trade slightly higher than the market price following the open offer, both of which would involve a total outgo of about Rs 2,340.35 crore.

In fact, GE group would be spending more than twice the money to acquire the Alstom T&D stock than the other group company as its shares, with a face value of Rs 2, quote at about 60 per cent of the value of the other group company stock, whose face value is Rs 10. The number of Alstom T&D shares being bought is also more.

Open offer price

In a communication to the stock exchanges, the GE group said it was making an open offer to acquire up to 17,479,143 shares representing 26 per cent of the total paid-up equity share capital of Alstom India Ltd (share face value Rs 10) at Rs 382.20 per share aggregating Rs 668.05 crore (Rs 6,680,528,455).

Similarly, another open offer was to the shareholders of Alstom T&D India Ltd for the acquisition of up to 64,011,639 shares representing 25 per cent of the total paid-up equity share capital from the public shareholders by GE group of companies at Rs 261.25 per share aggregating Rs 1,672.30 crore ( Rs 16,723,040,689).

Shares of Alstom India were down by Rs 1.65 to Rs 452.65 against the open offer price of Rs 382.20. The stock had dipped to a low of Rs 425.05 before pulling back. The stock had touched a 52-week high of Rs 480.90 on April 30 in a build-up to the open offer.

However, the shares of Alstom T&D India were up by Rs 16.75 to Rs 287.95 on the BSE. This stock had gained sharply from a low of Rs 110 on August 6 last year to the current levels. It had reached a yearly high of Rs 297 on the BSE on April 30.

Muted response to open offer

What could have contributed to the muted response to the announcement of the open offer was the caveat to the announcement that the offer would be proceeded with only if the transaction between Alstom and GE was concluded. If the transaction was not consummated for any reason, the acquirer and PACs shall not proceed with the offer, the announcement stated.

Binding offer

GE and Alstom had on April 30 announced that the purchasers have made a binding offer to acquire the thermal power, renewable power and grid businesses of Alstom. The Alstom S.A. board of directors has appointed a committee of independent directors to review the Alstom offer by June 2, 2014.

If this review concludes positively, an exclusivity period beginning not later than June 2, 2014 will be granted and other steps would be taken. The board of Alstom S.A. was also free to consider unsolicited alternative proposals for the acquisition of Alstom or of the power and grid businesses.

Subject to the above, the acquisition of the power and grid businesses is expected to close in 2015, the GE statement said.

Media reports said that German engineering giant Siemens wanted to engage with Alstom about `strategic opportunities', which has given rise to speculation that the race to acquire Alstom would become intense.

Apparently in view of the fluid situation, the investor response to the open offer announcement that is not yet a final announcement is muted.

(This article was published on May 5, 2014)
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