MCF takeover: Deepak Fertilisers takes the lead with revised open offer

Its bid is Rs 93.60 a share; Mallya-Poddar duo revise price to Rs 81.60 a share

Intensifying its efforts to take over Mangalore Chemicals & Fertilizers (MCF), Pune-based Deepak Fertilisers and Petrochemicals Corporation has revised its open offer price by 48 per cent from Rs 63 to Rs 93.6 a share, a move that could well prove to be the game-changer in the MCF takeover saga. Deepak Fertilisers already holds a 25.3 per cent in MCF.

Vying with Deepak in taking control over MCF is the Vijay Mallya-Saroj Poddar combine, who have also revised their joint open offer from Rs 68.55 to 81.60 a share.

Mallya, through his UB Group, holds a 21.98 per cent stake in MCF, while Poddar has a 16.43 per cent stake in the company.

“Our average purchase price of MCF shares works out to Rs 78 per share. We feel that this is a fair representation of the value of MCF, considering its synergies with our business in terms of product portfolio and geographic spread, its infrastructure facilities and the potential for further growth. We see value-creation opportunities over the medium to long term," said Somnath Patil, president and chief financial officer at Deepak.  

Deepak’s Rs 288-crore open offer, compared with Mallya-Poddar’s Rs 251 crore, has come as a surprising move, because a 48 per cent premium over the Pune-based company’s last offer price was not expected by analysts.

After approvals from the Securities and Exchange Board of India (Sebi) and the Competition Commission of India (CCI), both the suitors chose to revise their open offer price as the company’s scrip was already trading higher this week, compared to the earlier prices offered by Zuari-UB Group and Deepak Fertilisers.

The open offers are slated to start from October 1 and, as it stands, Deepak might be able to corner higher number of shares owing to substantially higher price offered to MCF shareholders. Following the announcement, MCF shares surged about 20 per cent, hitting a 52-week high of Rs 88.10 and it settled at the same level at the end of trading on the BSE on Friday.

Business Standard had earlier reported that Deepak Fertilisers was set to revise its offer thanks to ‘high interest’ in MCF. The latest move by the Pune-based company comes as another surprising move as most analysts said such a higher premium for shares of MCF was not expected and this would place the Pune-based company in a stronger situation.

“A price revision was on the cards since the market price of MCF was already higher than the earlier open offers. But Deepak has taken a lead, as of now, by quoting a price as high as Rs 93.60 for each share,” said an analyst, who closely tracks MCF.

Poddar was not available for comments. When Poddar joined hands with Mallya to launch the joint open offer, it was thought Deepak Fertilisers’ chairman and managing director Sailesh Mehta might find it difficult to beat them. However, Mehta’s revised offer on Friday has pushed him ahead in the race to gain control over MFC, one of the last jewels of Mallya.

Mallya has been under severe pressure after he planned to join hands with Poddar to keep Deepak Fertilisers from gaining control over MCF. United Bank of India’s declaring Mallya a wilful defaulter has put a question mark over his chairmanship of MCF.

Owing to the defaulter tag, Mallya might not be able to nominate three directors on the MCF board according to the agreement with Poddar.

Incidentally, MCF’s minority shareholders Nagreeka Foils had written to Sebi, asking Mallya to be removed from the MCF board and that the contractual agreements between UB and Zuari be cancelled. According to the agreement signed on May 12, Mallya will remain MCF chairman for the next five years if UB and Zuari gain a controlling stake in MCF.
DESPERATE SUITORS
Vying with Deepak Fert in taking control over MCF is the Vijay Mallya-Saroj Poddar combine

• April 2013: Zuari chief Saroj Poddar initially buys close to 10% stake in MCF with the intent of gaining control. Poddar makes it clear he is in talks to jointly run the company with MCF Chairman Vijay Mallya
• July 2013: Sailesh Mehta-led Deepak Fertilisers makes surprise entry by buying a 24% stake in MCF. Poddar increases his stake to 16.4% through open-market purchase of shares
• April 2014: Deepak further increases its stake to 25.3%, triggering an open offer
• May 2014: Poddar partners Mallya to launch a counter offer at Rs 68.55 a share versus Deepak's Rs 63 a share
• July 2014: Sebi clears open offer proposals of Mallya-Poddar and Deepak Fertilisers
• August 2014: CCI gives it nods to Deepak Fertilisers to launch open offer
• September 2014: CCI clears Zuari-UB group’s proposal to launch open offer for additional stake in MCF