Bharati Shipyard says it will top ABG’s counter-offer.
Drilling company Great Offshore today became the epicentre of a bidding war, with Bharati Shipyard saying it will top rival ABG Shipyard’s Rs 375-a-share offer for a controlling stake in the company.
Bharati, which holds 14.89 per cent of Great Offshore after buying the stock pledged with it last month, will revise its offer price to more than Rs 403, Managing Director P C Kapoor told reporters in Mumbai this evening, without giving the new price. Bharati bought 4.58 per cent of Great Offshore from the founders — the Sheth family — today at that price, he said.
While the block deal price is 17 per cent higher than Bharati’s original open offer price of Rs 344, it is 7.4 per cent more than ABG’s counter-offer that was made earlier in the day.
Bharati Shipyard last month acquired a 14.89 per cent stake in Great Offshore 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 its control.
Following this, Bharati Shipyard made an open offer to buy a 20 per cent stake at Rs 344 a share. A 15 per cent stake purchase in a company triggers a mandatory open offer by the acquirer.
But ABG Shipyard’s counter-bid to acquire 32.12 per cent stake of Great Offshore for Rs 375 a share prompted Bharati to acquire an additional 4.58 per cent stake from Bharat Sheth, cousin of Vijay Sheth in a block deal.
Bharati Shipyard has already invested Rs 245 crore to acquire about 19.5 per cent stake. And the revision of the offer price to Rs 403 has already made the bid to acquire 20 per cent stake dearer by about Rs 50 crore. “We have the funds through internal accrual and we will seek financing, if required,” said Kapoor.
Bharati, however, appears to have its nose ahead in the race, as the block deal will push up its stake in the company to 19.5 per cent. Bharati, analysts said, would need just 6 per cent to become a 26 per cent shareholder and that will give it the power to block special resolutions.
Analysts however said Great Offshore was likely to see a protracted price war as ABG was unlikely to give up. Its Chief Financial Officer, Dhananjay Datar, said the company would decide its next move once Bharati came up with a revised offer.
Shares in Great Offshore soared 10.6 per cent today, up 7.9 per cent at Rs 413.6. ABG Shipyard finished 1.8 per cent higher at Rs 213.15.
ABG, which already holds a little over 2 per cent stake in Great Offshore, plans to fund the acquisition from internal accruals. It has a cash reserve of Rs 2,500-3,000 crore.
However, Bharati’s investors displayed concern over the offer escalating into a price war by taking the shares down 5 per cent to close at Rs 162.50.
Bharati must revise its offer for Great Offshore within 14 days, as per Securities and Exchange Board of India rules. The company may need as much as Rs 300 crore to enhance its offer and will use its own cash, Kapoor said. “We hold Rs 100 crore in fixed deposit,” he said.
ABG, which owns about 2.5 per cent of Great Offshore, offered to pay Rs 375 a share for an additional 33.85 per cent stake. ABG will use its own funds and debt to buy the stake, ABG Chairman Rishi Agarwal said.
SBI Capital Markets Ltd is managing Bharati’s offer, while Kotak Mahindra Capital Co is advising ABG.