Hostile takeovers in India

“LCI attempt to takeover Asian Paints

• In October 1997, Asian India faced a strong takeover threat from the same ICI, backed by the financial might of its UK-based parent company ICI Plc, just 15 years after Swaraj Pauls’ failed takeover bid.
• Atul Choksey, Asian Paints’ public face until then, had thrown the company into disarray when he planned a secret arrangement to sell his 9.1 percent stake to ICI UK.
• Though three other co-founders opposed his sale to a foreign party and threatened to refuse to register ICI’s shares in the same fashion as Escorts and DCM.
• Ultimately, the government of India, through its Foreign Investment Promotion Board, (“FIPB”) thwarted the bid, ruling that foreign acquirers taking control of an Indian company needed first to obtain approval of the board of directors of the Indian target
• The remaining co-founders owned far more than ICI’s 9.1 percent interest and hence retained control of the company.
• The transaction failed to gain ICI board approval without the support of the other three founders, and as a result, ICI was obliged to sell its investment in Asian Paints to UTI, a government-owned mutual fund, and two other cofounders.”

“India Cements successfully takeover Raasi Cements

• The only hostile takeover in Indian history resulting in the ultimate acquisition of the target by the hostile bidder occurred in 1998 when BV Raju sold his 32% stake in Raasi Cements to India Cements.
• India Cements made an open offer for Raasi shares, and it acquired roughly 20% on the open market,” but faced resistance from the founders of Raasi as well as the Indian financial institutions which also owned substantial stakes in the firm.
• However, following a protracted battle which involved press conferences featuring the children and grandchildren of the founding family protesting the hostile bid, Raju ultimately sold out to India Cements in a privately negotiated transaction”.

Arun Bajoria vs Bombay Dyeing

• In 2000, Kolkatta-based Arun Bajoria bought 15% in Bombay Dyeing and threatened to make an open offer to public shareholders.
• He finally sold out his stake to the Wadias– the promoters of Bombay Dyeing–at a profit.

 “GESCO”

• The Dalmia group’s purchase and sale of its 10% stake in the real estate firm GESCO for an approximate 125% premium in 2000 are the closest India has come to greenmail.
• This hostile bid, for 45% of the company, was only averted thanks to a white knight recruited by the founding Sheth family, the Mahindra group, which offered to buy out the entire remaining float for an even higher premium
• After an intense bidding war that drove the initial offer price up roughly 100%, the Mahindra-Sheth group agreed to buy out the Dalmias’ 10% stake.”

RK Damani vs VST Industries

• In 2001, stockbroker Radhakishen Damani made an open offer for BAT-controlled VST Industries, but was foiled by ITC which entered the fray as a white knight, with support from BAT.
• Damani still holds 26% in VST.

Harish Bhasin vs DCM Shriram Industries

• In 2007, stock-broker Harish Bhasin bought 25% in DCM Shriram Industries through a combination of open market purchases and an open offer.
• The promoters countered the move by issuing warrants to themselves and increasing their stake.

Essel Group’s bid for IVCRL

• In 2012, Essel Group’s Subhash Chandra sought to control Iragavarapu Venkata Reddy Construction Limited (IVRCL), an infrastructure company.
• The promoters in the target company had only 11.2 per cent stake in IVRCL.
• Subhash Chandra’s Essel Group after acquiring 10.7 per cent stake in IVRCl, made a U-turn and decided to exit its shareholdings in the target company

“Mindtree Limited (“Mindtree”) acquired by Larsen and Toubro Limited (“L&T”)

• This was the second successful takeover after India Cement’s successful takeover of Raasi Cement in 1998.
• L&T, does not have any promoter, the promoters of the target, Mindtree, hold a mere 13.32 percent. Mindtree’s shareholding pattern presents a recipe for a hostile takeover in the Indian context.
• Siddhartha has been the largest shareholder of Mindtree with a 20.32 % stake, although he was not designated as a promoter. The takeover was activated when L&T entered into a share purchase agreement to acquire Siddhartha’s shares in Mindtree at a price of Rs 980 per share. Being less than the mandatory offer threshold of 25 percent as prescribed in the SEBI (Substantial Acquisition of Shares and takeover) Regulations, 2011, L&T would not have been obligated to make a mandatory offer.
• L&T also placed an order with a broker to purchase up to 15 percent shares of Mindtree on the market at a price not more than Rs 980 per share.
• It is L&T’s execution of the SPA coupled with its order to the broker that breached the 25 percent threshold, and hence L&T has announced a mandatory offer to Mindtree’s shareholders for an additional 31 percent shares at the price of Rs 980 per share, to be Paid in cash.
• L&T potentially had the option of making a voluntary offer after acquiring Siddhartha’s stake of 20 percent, but instead it decided to trigger the mandatory offer route by throwing in the market purchases through the broker into the mix.
• L&T has raised its stake to 25.94 percent and queries by the SEBI has resulted in postponing the open offer by L&T though it seems inevitable that the acquisition will proceed as contemplated”.

Original Article: https://www.linkedin.com/pulse/hostile-takeover-india-study-covering-statutory-cases-ayush-rastogi#:~:text=The%20only%20hostile%20takeover%20in,Raasi%20Cements%20to%20India%20Cements.