Digital first delisting case via reverse book building

The proposed purchase of Digital GlobalSoft's entire outstanding shares with the public by Hewlett Packard (India) will be the first deal to go through the reverse book-building process under Securities and Exchange Board of India's (Sebi) delisting guidelines.

Since this is the first time that a reverse book-building issue is taking place, sources said the markets regulator has agreed to extend its full cooperation to the issue in terms of technicalities.

The floor price, which is the average of the 26 week high-low price, will be taken with reference to the date of actual announcement by HP, which will be after the extra-ordinary general meeting.

The Rs 750 price that has been fixed is merely an indicative price which the company, in consultation with its advisor ICICI Securities, has fixed.

A Murugappan, joint head of investment banking and M&A advisory, I-Sec, said the company is committed to repurchasing the shares from the shareholders at Rs 750 per share.

He, however, made it clear that they were not prepared to offer a higher price for the buy-back. In case their price limit is not met, the company will go back to the drawing board to chalk out an alternative plan.

I-Sec officials as well as Balu Doraiswany, president H-P India Sales Pvt Ltd, said they were confident of the proposed acquisition going through.

Incidentally the company has been technically forced to undertake the acquisition since the stock exchanges, in a communication in November, said that 70 per cent is the limit for Digital GlobalSoft at which compulsory delisting will be triggered.

Once the demerger and transfer of HP Services division to Digital GlobalSoft in exchange for issue of shares in DGS becomes effective, shareholding of HP in DGS will rise from the current 50.6 per cent to 76.20 per cent.

Faced with the prospect of either bringing down its shareholding in DGS to 70 per cent or buying up the remaining shareholding the company has decided to simply buy up the outstanding shares of DGS.

Around 85 per cent of Digital's revenues are from HP, said Doraiswamy. Hitherto the company has been entirely export oriented but after the acquisition goes through HP plans to use the company's expertise for solutions in the domestic market as well with special emphasis on telecom, finance and enterprise resource management.