Offers Rs 1,900 a share to minority shareholders to settle legal battle; hearing on Thursday.
Chocolate maker Cadbury India has offered Rs 1,900 per share, a nine per cent premium to the price recommended by independent evaluator Ernst & Young (E&Y), to minority shareholders for its buyback programme to settle a prolonged court battle.
Lawyers representing the minority shareholders have received a proposal from Rajesh Shah & Co, Cadbury India’s advocate in this regard, say sources. The next hearing of the case is in the Bombay High Court (HC) tomorrow.
However, the new offer is unlikely to please all. “We have received dissent letters from more than 25 minority shareholders regarding Cadbury India’s new offer. We will collect the views of other shareholders and present them in the court,” said Hinesh Doshi, vice president of Investors’ Grievances Forum (IGF), a Securities and Exchange Board of India-recognised association.
Some shareholders like Dipak Gidwani, who along with his family owns more than 5,000 shares of Cadbury India, are in favour of accepting the new offer, considering the time and cost involved in fighting the long legal battle.
E&Y, the HC-appointed independent valuer, had recommended Rs 1,743 per share for the buyback offer. In its valuation report to the HC, the accounting firm had said a special premium may be required over the base price recommended by it.
Minority shareholders have been demanding that as it is a compulsory buyback from the company, a premium over the base price is justified. A valuation report from J C Desai & Company, presented by minority shareholders in court, had recommended a 20 per cent premium to the Rs 1,979 a share base value arrived at by the firm.
Cadbury India had earlier rejected the premium demand over the E&Y calculation, citing additional cost in terms of dividend distribution tax (DDT) on the buyback price. By the rule, Cadbury India will have to pay 16.61 per cent tax (DDT plus surcharge and education cess) on the price at which shares would be bought from minority shareholders.
UK-based Cadbury Plc, Cadbury India’s former parent, which was bought by Kraft Foods last year for $19.6 billion, wanted to buy back the remaining 2.42 per cent stake from minority shareholders of its Indian unit. However, the latter were not happy with the company’s offer of Rs 1,340 per share and had approached the HC, which had appointed E&Y to revalue Cadbury India’s shares.
An e-mail query to a Kraft spokesperson on Cadbury India's revised offer to minority shareholders remained unanswered.