Thumbs down to a valiant takeover attempt

This was a takeover which the entire country watched. The fight for control of Indian Aluminium between Canadian parent Alcan and Sterlite I...

This was a takeover which the entire country watched. The fight for control of Indian Aluminium between Canadian parent Alcan and Sterlite Industries was more than just a corporate battle. It also signified the beginning of an era of takeovers and mergers. An era where an attempt of hostile takeover was not considered a crime. Where the shareholder value is more important that the promoter8217;s interest. In the end, the shareholder won, while the financial institutions had the last say. Alcan Aluminium of Canada acquired 20 per cent stake held by the financial institutions. Thus, the Canadian major managed to increase its stake in Indal to over 54.6 per cent on the last day of the closure of the open offer period.

Bringing an end to a three-month long bitter takeover battle, Alcan which presently owns 34.6 per cent stake in Indal 8212; struck a deal with the institutions LIC, GIC and UTI to acquire their holding in Indal at a price of Rs 200 per share in cash. Alcan will bring in nearly Rs 285 crore to buy theadditional stake in Indal. The same price would now be offered to the other shareholders under the Sebi8217;s takeover code.

Even though institutions were earlier interested in selling the stake to Sterlite at a price of Rs 221 Rs 131 cash and Rs 90 by way of a preference share issue, they opted for Alcan as the Canadian firm hiked the price from Rs 175 to Rs 200 per share.

Sterlite bid for Indal was scuttled by the Securities and Exchange Board of India Sebi which asked Sterlite to comply with its guidelines relating to preference issue of shares.

Sterlite gave an insertion in a newspaper stating that compliance of Sebi8217;s preference share guidelines would entail obtaining the approval of its lenders, domestic and foreign as well as passing of fresh resolution at an extraordinary general meeting of its shareholders to be convened for this purpose. Indal and Alcan were quite happy with the outcome. Both had been against Indal being taken over by Sterlite, a company which they thought had littleexperience in aluminium. A jubilant Indal official said: 8220;Alcan will buy only 20 per cent stake from institutions as it received approval from the Secretariat of Industrial Assistance SIA for increasing its stake in Indal from 34.6 per cent to 54.6 per cent.8221;

On the other hand, gloom descended on the Sterlite8217;s camp as it failed in its effort for what could have been largest acquisition in the Indian corporate history. Sterlite sources say in the absence of any detailed order from Sebi, it was forced to issue an advertisement today saying that it may not be able to accept the shares of the investors as complying to these guidelines might necessitate certain fresh approvals.

Sterlite made an attempt to take over Indal in February this year at Rs 90 per share which was termed hostile by Alcan, one of the main promoters of the company. Subsequently, both Alcan and Sterlite increased their open offer to Rs 175 and Rs 221 per share respectively. While bidding was on between both companies, a massive publicrelations campaign was launched by both the raider and the target company to thwart each other8217;s attempt. Even Indal8217;s top officials, who were supposed to be neutral jumped into the bandwagon to lobby for its Canadian owner.

In the dumps

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The markets are crushed. After a disappointing Budget, the negative noises made by international credit rating agencies led to huge tumble. It fell 128 points on Friday which brought it down by 357 points since the Budget was announced. First Standard amp; Poor8217;s Samp;P expressed disappointment at 8220;lack of steps8221; in recent Union Budget to address the large fiscal deficit. Then another leading global rating agency, Moody8217;s announced that it was reviewing India8217;s country ceilings for foreign currency debt and bank deposits for possible downgrade.

8220;Lack of any substantive measures by India to stimulate private investment in the recent Union Budget and the post-nuclear tests sanctions on it are likely to put pressure on India8217;s ratings for foreign currency debt andbank deposits,8221; Moody8217;s said.