New Delhi, Feb 27: The last fortnight has seen a flurry of mergers and acquisition (M&A) activity which adds up to a whopping Rs 800 crore. A string of friendly and hostile bids have given a host of small investors the opportunity to exit just when they had got disillusioned with the prolonged bearish phase in the market.Take the case of Raasi Cements. The scrip was languishing around Rs 50-55 before India Cements set its sights on the company. Thereafter, the stock shot up to over Rs 150 and touched an all-time high of Rs 191 on the Bombay Stock Exchange on Friday. Those still hanging on to the scrip can now rake in the moolah by opting for the India Cements offer at Rs 300 per scrip.
Similarly, Wockhardt's takeover of Merind Ltd has sent the latter's scrip soaring on the bourses. The scrip, hitherto quoting at around Rs 120, touched its three-year high of 230 on Thursday. In this case, too, the open offer at Rs 260 is enough incentive for investors to warrant an exit. The story is true for Indal,too.
However, let the fantastic returns in these cases not deceive you into believing that all is hunky dory in the M&A game. Lakme is a vivid example of how shareholders can lose out in this game. The daily 10 per cent fall in the scrip on the exchanges post-buyout by Lever has eroded shareholder value considerably. The scrip has lost more than Rs 130 in less than 10 trading sessions, reducing the scrip price by half. For the shareholder, there is little solace in the Rs 200-crore acquisition money received by Lakme. Left with almost nothing within its fold (except the export division), the bear operators are having a field day in the counter.
Irrespective of what effect the M&A game has on the shareholder value, investors today have to brace themselves for a plethora of mergers and acquisitions which are in the offing. Yes, M&As are here to stay, especially as most companies are quoting near their all-time lows which makes takeovers cheap. In fact, most low-priced scrips with a low equity base are idealtakeover targets and investors in such scrips must be prepared for any such eventuality.
Consider this: Not content with the takeover of Merind from the Tatas, pharma MNC Wockhardt has already earmarked Rs 200 crore for more acquisitions in the pharma industry. HLL may well be on the prowl again as takeovers are an integral part of its corporate philosophy.
MNCs wishing to set shop in India are also on the lookout for companies with manufacturing facilities as the cost of setting up greenfield projects may not be cost-effective. The recent takeovers also point to the fact that the M&A game is not restricted to a few sectors alone. Industries as wide and varied as infrastructure, software, pharma and even distilleries have come within its ambit.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
