It may be time for some fireworks on the UB group-controlled Mangalore Chemicals & Fertilizers Ltd (MCF) counter.
As anticipated, the Saroj Poddar-controlled Zuari Fertilisers and Chemicals has joined hands with Vijay Mallya’s UB Group in an attempt to gain control over MCF.
On Monday, the combine made a counter-offer for 26 per cent stake of MCF at ₹68.50 per share.
The offer was nearer the day’s closing price of ₹70.55 per share on the BSE and ₹5.50 a share higher than the initial offer made by the Sailesh Mehta-run Deepak Fertilisers and Petrochemicals Corporation.
Zuari owns 16.43 percent in MCF and promoter Mallya holds about 22 percent (almost half of which is pledged) while Deepak Fertilisers controls 25.3 per cent.
The remaining 36 per cent is held by the public. Excluding institutional holdings of approximately 4.3 per cent, the rest is floating stock.
Rival offer expectedThe Zuari-UB counter-offer has thrown open a number of possibilities, the strongest of which is a revised offer, at a lucrative price, from Deepak.
An analyst, who did not want to be named, feels the stop price for MCF is somewhere between ₹75 and ₹80 a share.
While company officials are tight-lipped about their next move, market sources say Deepak Fertilisers has entered the game with a war chest ready. The company had put its initial offer well below the market price to keep room for a further revision.
As a counter-strategy, Poddar has now raised the bar substantially, to force Mehta to either go for the kill or get out of the race.
With a board meet scheduled on May 15, Deepak Fertilisers may give final touches to its strategy in next 48 hours.
“It’s a fight to see who blinks first. But, hopefully no one will pay unreasonably high prices for MCF,” the analyst said.
He is expecting Mallya to bow out of the race if Deepak stretches the offer up to ₹80 a share.
More possibilitiesZuari acquired its 16.43 per cent shares at a substantial price advantage over Deepak Fertilisers.
Naturally, it enjoys more headroom to outbid Deepak in the current round.
Moreover, since it has already joined hands with Mallya, acquiring 13 per cent through the open offer will put the combine in complete control of MCF with a 51 per cent stake. This may open a fresh opportunity for Mallya to either remain seated in MCF or even get out in due course by transferring shares to Poddar (if he is a co-promoter) at an opportune moment through a private treaty.
Theoretically this is a win-win for both Poddar and Mallya.
Incidentally, even if Deepak Fertilisers is successful in acquiring 26 per cent to take its tally over 50 per cent, Mallya’s co-operation is important in running the show at MCF.
The company’s memorandum of articles state that Mallya can field three nominees on the Board with as little as a 15 per cent holding.