HeidelbergCement has agreed to pay the non-compete fees to all shareholders who participate in its open offer if its petition to the Securities Appellate Tribunal (SAT) challenging a Sebi directive is rejected. The fees were originally meant for the existing promoters of Mysore Cements.
The German company on Monday received a go ahead from the SAT to kick-off its open offer provided it was ready to pay the additional Rs 14.50 per share, the non-compete fees, to all shareholders whose shares are acquired as a part of the open offer.
So, if Heidelberg’s petition is rejected by SAT, the company’s open offer price will go up by 25% from Rs 58 to Rs 72.50 per share. Heidelberg will also be liable to pay interest at the rate of 6% per annum from the date the additional amount is due to the date it is actually delivered to shareholders. The MNC cement maker has also been asked to furnish a bank guarantee in favour of Sebi for an amount equal to the aggregate differential price for the entire size of the open offer, assuming the offer is fully subscribed.
The open offer is now slated to open on December 27, 2006 and will close on January 15, 2007.Last month, Sebi issued a directive to Heidelberg saying that the payment of non-compete fees to the selling promoters, SK Birla group, of Mysore Cements did not seem justified.
Although Sebi is yet to make a formal announcement on reasons for its insistence on a revision in the open offer price, sources close to the development say that if promoters of sick companies are offered non-compete fees, then the same benefit must also accrue to retail shareholders who stay invested in a company, despite its less-than-desirable performance.
They said this probably also explains why Sebi cleared the proposal of the Swiss cement major Holcim when it acquired a 14.8% stake in the profitable Gujarat Ambuja in January 2006, and paid a non-compete fees of Rs 15 per share to the promoters of Gujarat Ambuja. HeidelbergCement subsequently moved SAT challenging the Sebi directive.
HeidelbergCement bought a majority stake in the Bangalore-based Mysore Cements for $100 million in July 2006, but its open offer has been stalled for the last six months.If Sebi manages to convinces SAT and make HeidelbergCement pay up the difference it will set a new precedent as far as takeover regulations concerning sick companies are concerned.