ABG revises offer price, buys more stake; Bharati Shipyard expected to match revision
In its continued battle to take control of Great Offshore, the drilling firm, ABG Shipyard both raised its offer price for the former’s shares and continued to buy additional stake through bulk deals.
Today, it bought 2,12,348 shares of Great Offshore (0.6 per cent stake) from Atna Investments for Rs 450 a share on the National Stock Exchange (NSE), taking its total shareholding above 8 per cent. It had bought a 5.18 per cent stake in bulk deals on Wednesday to outbid its rival, Bharati Shipyard.
Also today, ABG informed the exchanges that it had revised its open offer price to acquire a 32.12 per cent stake in Great Offshore to Rs 450 a share, from Rs 375 a share earlier. Analysts believe Bharati Shipyard will try to match this. At Rs 450 a share, ABG’s latest offer is 11 per cent higher than Bharati Shipyard’s revised offer of Rs 405 a share made on July 3 and 31 per cent higher than its initial offer of Rs 344 a share made on June 3.
“The valuations have certainly got expensive,” said Jehangir Adi Master, an analyst with Pranav Securities, a Mumbai-based brokerage. “Bharati Shipyard does not have much of choice; its significant order book exposure to Great Offshore compels it to go for revising the price further.”
ABG, India’s biggest private sector shipyard, and Bharati, the second-biggest, want to buy Great Offshore, as demand increases for drill ships and other offshore structures. Depleting crude reserves are prompting oil companies to search for resources in deeper and unexplored waters.
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For both shipbuilders, the acquisition will take them a step further in the offshore services business and turn the buyer into an integrated firm, though a price war may erode the benefits of the acquisition. Neither company responded to newspapers calls.
Bharati Shipyard has already invested Rs 245 crore to acquire about 19.5 per cent in Great Offshore. Bharati also has a quarter of its Rs 5,093-crore order book from Great Offshore and that is one compulsion driving it, say analysts.
Bharati acquired a 14.89 per cent stake in Great Offshore in May, at a price of Rs 315 per share, from its vice chairman and managing director, Vijay Sheth, following an invocation of shares which he had pledged. This left Sheth with less than one per cent stake in the company and he lost control. According to the analysts, Bharati’s primary interest in acquiring the stake was to save its order book.
“Bharati’s strategic intentions would make it bid higher than any financial investor would,” said Saeed Jaffery, analyst with Ambit Capital, a domestic brokerage. It has valued the stock at Rs 410. It expects the earnings per share of the company to be Rs 61.7 in 2010-11, up from an estimated Rs 55.5 in the current financial year. The brokerage estimates the book value for the next financial year at Rs 387 a share. At Rs 410, the stock is valued 1.1 times the book value and 6.6 times the earnings for the next financial year.
Besides, Bharati needs just 6 per cent to become a 26 per cent shareholder and that will give it the power to block special resolutions. It will have to pay Rs 334 crore to acquire a 20 per cent stake if it meets the Rs 450 a share open offer.
Stocks of Great Offshore gained 1.64 per cent to Rs 465 a share on the Bombay Stock Exchange on Thursday, when the Sensex, the benchmark index, gained 1.4 per cent to touch 15,387.