MUMBAI, March 30: The Autoriders Industries' bid to acquire a 20 per cent stake in Saurashtra Cement has run into rough weather with the Mehtas-owned target firm refusing to hand over the shareholders` distribution list, as required under the takeover code, citing a court case filed by a minority shareholder.Autoriders claims it has not received copy of such a court order, and has decided to file its open-offer of Rs 75 per share with the Securities and Exchange Board of India (Sebi), well ahead of the closing date of April 3.
Saurashtra Cement is believed to have taken steps to formally communicate the development to Autoriders. "We have been served an order by a competent court restraining us from acting in pursuance of the March 19 announcement of Autoriders," company sources told The Financial Express. The shareholding details of a target company are required to be provided to the bidder company as per the provisions of Sebi's takeover code. But it appears a court injunction, issued in a casefiled by an as-yet unnamed minority shareholder, has enabled Saurashtra to get a breather. This development may spark-off a fresh round of litigation over the Autoriders' open-offer.
Sources say that Saurashtra Cement has received an injunction order from a court following a petition filed by a minority shareholder on grounds that could not be immediately ascertained. On March 19, Autoriders Industries, promoted by industrialists Praful and Mukesh Patel, launched an offensive on Saurashtra Cement by announcing an open-offer for a 20 per cent stake in the company.
The battle got murkier as the Mehtas refused transfer of a block of 77,000 shares, while maintaining that there were no threats even of losing control over the management as the promoters held over 50 per cent of the total equity jointly with friends and relatives. Autoriders, on the other hand, maintained that the response to its offer has been enthusiastic, and it was to a large extent banking on Saurashtra's very high floating stock of 32per cent. Unlike in the other ongoing takeover battles where financial institutions (FIs) hold a large chunk of the equity, the FI holding in Saurashtra is only around 16 per cent.
Autoriders Industries has already acquired 10,40,650 shares in Saurastra Cement, while Autoriders Finance, acting as "persons in concert", has picked up 1 lakh shares of the company. Together, the total shareholding of the Patels in Saurashtra Cement has touched 11,40,650 shares, representing 9.51 per cent of the company's subscribed equity capital, the announcement stated. The acquirers, in the public announcement, had stated that the takeover bid is part of its plans to "diversify into the manufacturing sector." "The assets of the company are priced significantly below their future potential," the acquirers said, adding that the brand has not been performing in recent times. "The acquirers perceive that the company has substantial growth potential and can be turned around with the infusion of adequate funds, technology andprofessional management," said the announcement.
INSIGHT
Poor ploy
Targets of takeover attempts are increasingly using the courts to protect themselves, or at least to try and delay the takeover process. The other example is the Raasi-India Cements tangle, where too the courts have been involved.
For the investor, this tendency increases uncertainty, and, if shares have already been lodged with the acquirer, the payment gets delayed. Unless some way of expediting decisions in the matter is found, the entire takeover process is in danger of dying a natural death.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
