The Securities and Exchange Board of India (Sebi) insistence on including non-compete fees in Germany’s HeidelbergCement’s open offer for the minority shareholders of Mysore Cement could likely signal a move to reconsider the provisions in takeover regulations.
The market regulator is learnt to have asked the German cement major to revise its open offer upward by 25% to Rs 72.50 a share, in line with the price paid to the SK Birla group, promoters of Mysore Cement. It had offered Rs 58 per share to the retail shareholders in its open offer.
HeidelbergCement bought a majority stake in the Bangalore-based Mysore Cement for $100m in July 2006, buying 50.1% from the promoters.
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 the company’s less-than-desirable performance.
They said this probably also explains why Sebi cleared the proposal of 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.
However, the same sources added that since there is nothing in law that mandates that promoters of sick companies be treated differently from those of more successful companies, it’s likely that HeidelbergCement will contest Sebi’s view on this.
When contacted, Mysore Cement MD Ashish Guha declined to comment. Sources said that even if HeidelbergCement refuses to revise the offer and takes the matter to the Securities Appellate Tribunal (SAT), Sebi would still have made a point of taking up the cause of minority shareholders.
[Source: The Economic Times, India]