Battle for VST hots up, ITC launches counter-offer

Battle for VST hots up, ITC launches counter-offer
ENS ECONOMIC BUREAU

MUMBAI, MAR 1: The battle for VST Industries is hotting up. Calcutta-based tobacco major ITC has launched a counter-offer for VST Industries at a price of Rs 115 as compared to a takeover offer made at a price of Rs 112 by Mumbai-based stock broking firm of Brightstar, belonging to the Damani brothers.

Budget 2001: Full Coverage

ITC's wholly owned subsidiary Russell Credit on Thursday announced it would make a competitive bid for 20 per cent of the equity of the Hyderabad-based tobacco company. Incidentally, BAT plc of the UK holds around 32 per cent stake in both ITC and VST. Financial institutions and public hold the balance stake in both the companies.

However, Russell Credit, which has also informed the stock exchanges of its move, has made the counter-offer as a competitive bid with the intention of substantial acquisition of shares/voting rights without change in control or management in the company. In other words, at this point at least, the ITC group is not aiming to take control of VST Industries, say officials.

The ITC strategy, following the open offer move, seems to be clear: the company, which at this point is not aiming to gain control of VST, merely wants to keep itself in the picture as far as acquisitions of shares in VST go.

But what ITC has ensured with this masterstroke is that it keeps itself informed of whatever is happening at VST now. Since ITC is not sure in whose hands VST can go following the open offer by the Damanis, the only way it can, as a competitor, keep itself in the loop is to make a competitive bid itself, sources said.

The public announcement on behalf of Russell Credit, issued by Kotak Mahindra Finance Company on Thursday, makes a counter-offer to all VST shareholders to acquire upto 30,88,384 fully paid up equity shares of Rs 10 each. The offer is payable in cash and is not subject to any minimum level of acceptances.

Russell Credit does not hold any shares in VST Ltd, but both ITC and VST have shareholdings by BAT of the UK in them. All eyes are now on the UK tobacco major to find out whether it would make any counter-offer to the two bids.

The specified date for the Russell Credit offer has been fixed at March 7, 2001 and the offer would open on April 17 and close on May 16, 2001. The Bright Star offer begins on March 30 and closes on April 29. The ITC's board had authorised the investments in Russell Credit for general purposes and the detailed moves would be undertaken by Russell itself and not ITC, the sources explained.