Gesco takeover impact– GE Shipping investors gain, finally

“GES share was languishing in the range of 14-20 all these months. The company failed to create shareholder value…. now when the takeover news surfaced in Gesco, GES stock also benefited. We need more takeovers in the country… then only promoters and managements like the Sheths will learn a lessson,” said a GES shareholder.

The market capitalisation (the market value of all its listed shares) of GE Shipping has now gone up from around Rs 660 crore to Rs 871 crore in two weeks. “Shareholders of GE Shipping have added Rs 200 crore to their net worth. This is something good. This happened mainly because of the takeover news in Gesco,” said an analyst. While the 52-week high for the GES share was 35, the low for the year was 14.

Gesco Corporation was de-merged from GE Shipping last year by transferring the property development division. The Sheths, the original promoters of GE Shipping, hold only a small stake of around 13 per cent in GES, making it vulnerable for a takeover attack.

However, the situation is not that bad in Bombay Dyeing where the promoter Nusli Wadia controls around 32-33 per cent – 40 per cent if the holding of his associates is taken into account – stake in the company. This means it will be a tough proposition for Bajoria — who holds nearly 14 per cent in Bombay Dyeing — to take over the company even if he makes an open offer to buy another 20 per cent from the public. Here again, the fact remains that its share price was languishing around Rs 60-100 in the last a few months.

In most of the Indian companies, promoter holding is below the 26 per cent level, which is crucial to block any board level resolutions. The Sheths are not in a position to block any resolution as their holding is only half of this crucial level. At the current market prices, an acquirer needs only Rs 226 crore to buy 26 per cent holding in GE Shipping. For this amount, he gets a company with an equity capital of Rs 258 crore and reserves of Rs 869 crore.

There is little wonder that chambers and corporate chieftains are shouting from the rooftops about the lacunae in the takeover code and creeping acquisition route. When there were no standard rules for takeovers, chambers were clamouring for one. As an analyst pointed out, when rules were set and hostile takeovers beceme a reality, they want Sebi to change norms to suit their requirements. Nobody should think that listed companies are their private properties. There should be accountability. Shareholders were seeing their wealth depreciating or remaining stagnant for years. The era of hostile takeovers will change all that.