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| RMW knocks on Sebi door to get equal seats on Fame board |
| BS Reporter / Mumbai Mar 05, 2010, 01:06 IST |
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Reliance MediaWorks (RMW) has approached the Securities and Exchange Board of India (Sebi), seeking equal representation on the board of multiplex operator Fame India.
The representation came after INOX Leisure inducted three new directors on the board of Fame, which is in the middle of a takeover battle.
RMW, in a letter to Sebi, said appointment of representatives of one acquirer, without an equal representation of the other acquirer, in a situation where competing offers have been made to the shareholders of Fame, is against the principles of neutrality and equal opportunity.
Fame India is in the midst of a two-way takeover battle between INOX and RMW. Both INOX and RMW made open offers to buy 20 per cent and 62 per cent stake in the company at a price of Rs 51 and Rs 83.40 per share, respectively. While INOX already owns 51 per cent in Fame, RMW acquired around 14 per cent in the company through open market operations.
On Sunday, Fame India had announced the appointment of Kishore Biyani, chairman of the Future Group, as an independent director. In addition, INOX’s two directors, Deepak Asher and Pavan Jain, were inducted on Fame’s board. Asked to comment, a Reliance spokesperson confirmed a letter had been sent to Sebi but did not share the contents.
An INOX spokesperson refused to comment on Reliance’s letter to Sebi.
In the letter, RMW also alleged the original directors of Fame acted in breach of their fiduciary responsibilities and their duty to act in the best interests of Fame and its shareholders, by approving the appointment of the INOX directors. RMW further said Fame’s directors also failed in their duty by supporting INOX’s open offer price of Rs 51 per share.
“The original directors are under a fiduciary obligation to ensure that the best price is paid to the public shareholders and should not have, therefore, supported the INOX open offer which is at a 63.55 per cent discount to the RMP open offer price of Rs 83.40,” it said in the letter.
Further, it said that in the event the acquisition of promoter shares is finally determined to be fraudulent by Sebi and where the RMW open offer is successful, Reliance Media would have considerable difficulty in dislodging the INOX directors. Besides, Reliance said, during the period INOX is driving the affairs and management of Fame, it might enter into irreversible transactions which could be to the detriment of Fame and its shareholders.
In an earlier letter to Sebi on February 16, RMW had alleged that certain pre-existing financial arrangements between INOX and the promoter-shareholders of Fame had not been disclosed. It had alleged that Fame promoters had transferred their shares to a separate account, where a director of INOX had been made a joint holder. It also alleged suspected violation of the foreign exchange laws, in relation to the foreign currency convertible bonds issued by Fame.
It asked Sebi to investigate the matters and to take action to protect the interests of Fame’s minority shareholders.
In response to the earlier allegations, INOX had said, “The Sebi Takeover Regulations prescribe a defined process and time periods to respond to such competitive open offers. Gujarat Fluorochemicals (GFL) and INOX will consider its options in the best interests of its shareholders and the shareholders of Fame. The allegations and insinuations made in the public announcement by RMW, against Inox and GFL, are untrue, baseless and misleading, and appear to be an attempt to frustrate the sale of shares between the promoters of Fame and INOX/GFL.”
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