Sebi asks Actis to up Phoenix price by 25%

The Securities and Exchange Board of India (Sebi) has asked the buyout fund Actis to increase the price of open offer for the minority shareholders of Phoenix Lamps by 25 per cent to Rs 190 a share.

The open offer was made after Actis bought the entire 37 per cent stake in Phoenix Lamps from its promoters, the Gupta family. Priced at Rs 152 a share, the mandatory 20 per cent public offer was supposed to open on August 31 and close on September 19.

The capital market regulator Sebi has asked Actis to pay the same price it offered to the promoters.

Actis had agreed to pay Rs 190 a share to the promoters of the company, 25 per cent higher than the price of the open offer on account of non-compete fees, an agreement the market regulator did not find merit in.

This is the second instance of the Sebi coming down heavily on acquirers for paying the promoters more on account of non-compete fees. Last month, it had asked the German cement company HeidelbergCements to raise the open offer price by 25 per cent to Rs 72.50 a share, the price it agreed to pay the promoters including non-compete fees.

Heidelberg, however, challenged the Sebi order with the Securities Appellate Tribunals. Industry sources said Actis' future course of action might link to the outcome of the SAT ruling on HeidelbergCements.

The future action of Actis was not immediately known. It is speculated in the market that Actis will take a call on this towards the end of this month. The Phoenix Lamps stock today closed 1.46 per cent lower in a strong Mumbai market. The stock close d at Rs 155.45 on the Bombay Stock Exchange, against the previous close of Rs 157.75. During the intra-day trades, the stock rose to Rs 159.

In a two-pronged deal, Phoenix Lamps had announced in July that Actis would buy 8.73 million shares, representing 37 per cent stake, from the promoters of Pheonix Lamps.

It also announced to allot 4.1 million convertible warrants to Actis at Rs 102 apiece. The warrants will be converted into equal number of equity shares after 18 months.

Payment of non-compete fees is not uncommon in mergers and acquisitions in India.

Early last year, Holcim paid Rs 90.64 a share in an open offer to the shareholders of Gujarat Ambuja Cements, while it paid Gujarat Ambuja's promoters Rs 105 a share, with the extra Rs 14.36 a share being labelled as non-compete fees.

Phoenix Lamps is the third management buyout by Actis in India after Nitrex and Punjab Tractors. Phoenix Lamps, owner of Halonix brand, posted a net profit of Rs 24 crore last year on total sales of Rs 230 crore.