BAT may seek govt nod for VST counter offer

BAT may seek govt nod for VST counter offer
ENS ECONOMIC BUREAU & AGENCIES

MUMBAI, FEB 15: British-American Tobacco Plc (BAT), co-promotors of India's largest tobacco form ITC, is likely to seek the Indian government's permission to make a counter offer to raise its stake in VST Industries Ltd, which is the target of a hostile takeover bid by two Mumbai-based stock brokers.

BAT officials believe it may need to obtain prior approval as Indian takeover rules are unclear on whether foreign collaborators and stakeholders can make a counter offer.

On Wednesday, Bright Star Investments, a Mumbai-based broker R S Damani, announced plans to buy a further 20 per cent in cigarette maker VST at Rs 112 per share. It already owns 14.97 per cent along with associates.

BAT is one of VST's largest shareholders with a 32 per cent stake. VST shares were up 7.95 per cent at Rs 103.25 on Thursday morning, after rising eight per cent on Wednesday. VST will call a board meeting soon to discuss the issue. "We are currently in the process of examining the details of the new development and its implications... we have no further comments to make at this point of time," VST Chairman Abhijit Basu said recently.

Although BAT was earlier keen to hike its stake in ITC to over 51 per cent, it was not given permission by the government. The ITC board was also against BAT getting 51 per cent in the largest tobacco company in India.

Meanwhile, ASK Raymond James' CEO John Band said the VST Industries' share is currently undervalued and the takeover bid by Mumbai-based Damani Brothers is expected to help the company realise its true market value. "The Damani brothers have mounted an open offer for VST because they felt that the company's scrip was undervalued and that another stake holder could help in better managing the company," Band said.

He said in the past VST had been saddled with a host of unrelated businesses due to imprudent diversification. "VST's problem has been irrelevant diversifications likethat into agro products. Today, it has five or six subsidiary operations including cigarettes, bulk tobacco and natural products," Band said, adding this had led to undervaluation.

He said the book value of the VST share was around Rs 21, but it was quoting in the region of Rs 75 before the open offer was mounted at Rs 112.While declining to comment upon whether British tobacco major BAT Plc may now launch a counter-bid to hike its present stake in VST, after two of its previous attempts failed, Band said "Damani feels another substantial shareholder will help improve management of VST."

ASK Raymond James & Associates is the merchant banker for the open offer by Damanis for acquiring another 20 per cent stake in VST.

Kesoram faces takeover trouble
MUMBAI:An overseas Indian has bought over 12 per cent of the shares of the Kesoram Industries in recent weeks, thereby fuelling a 140 per cent jump in the company's share price since January this year.

The buyer, Shiv Kumar, a former investment banker with the Bank of America and Merrill Lynch, is now close to the 15 per cent mark where it becomes mandatory to make an open offer to the public. Kumar was saying the company's assets are worth much more than the company's current market value.

The current owners, the BK Birla group, on Wednesday bought 500,000 shares in the company at Rs 58 per share from ICICI, a financial services firm. The Birla group had also bought a similar number of shares on Tuesday, and now owns a 35-37 per cent stake.

On Wednesday, BK Birla said the group had been increasing its stake in the but that he did not know if a Dubai-based party was also buying. "We have not received any information of any purchases by any Dubai-based party... these are reports which we are seeing in the media only," company chairman B K Birla said. "We have acquired around two per cent additional stake in our company in the last one month or so," he said, but gave no details.