ABG exits Great Offshore race

In a surprise move, ABG Shipyard today exited the race to acquire Great Offshore and sold its 8.2 per cent stake to three financial investors. The ABG moves comes after seven months of intense rivalry with Bharati Shipyard through a series of competitive counter-bids. 

The Great Offshore stock lost about 6 per cent to Rs 512.90 a share on the Bombay Stock Exchange, as hopes of an increase in the open offer price faded after ABG’s exit from the race.

ABG’s decision came a day after Bharati offered to acquire 20 per cent stake at Rs 590 a share, a steep increase over its earlier offer of Rs 530.

According to stock exchange rules, however, ABG will have to go ahead with its open offer at Rs 520 as announced earlier, though this will be a technicality, since its offer price is lower than Bharati’s.

The offers of both companies will be open from December 3 to December 22.

ABG and Bharati officials could not be reached for comment. Sources familiar with the developments said ABG exited because it didn’t see much value in acquiring the shares at Rs 590.

Experts said acquiring Great Offshore could be a case of winner’s curse, as the Bharati open offer price is over Rs 200 more than its original one in May this year.

But others said the acquisition was important for Bharati, as Great Offshore was a good strategic fit. Bharati makes a large array of specialised sophisticated vessels for diverse offshore, coastal and marine markets and Great Offshore is an integrated offshore oilfield services provider, offering a broad spectrum of services to upstream oil and gas producers.

The exit of ABG Shipyard came as a surprise to many market players.

“The way the block deals have been done, it seems the institutions are working in concert with ABG,” said Arun Kejriwal, director, Mumbai-based investment advisory, KRIS.

Edelweiss Finance & Investment, ECL Finance and Carmona Investment & Finance bought 1 million, 1.07 million and 0.25 million shares respectively at Rs 580, Rs 575 and Rs 570 a share on the day.

The news of ABG Shipyard selling its stake brought down the prices of Great Offshore, as chances of the retail investors being able to sell shares came down. “ABG can revise its price at the last moment and with these institutions working in concert, it can take on Bharati Shipyard,” explained Kejriwal.

However, Edelweiss said it was an arbitrage trade for their company and it would tender the stock in the open offer.

Jehangir Adi Master, an analyst with domestic brokerage ICICI Securities said: “Since ABG has started selling its holding, it is clear that they are not part of the race to acquire controlling stake in Great Offshore.”

Bharati Shipyard acquired 14.89 per cent in Great Offshore in May at Rs 315 per share from its vice chairman and managing director, Vijay Sheth, following an invocation of shares that he had pledged.

This left Sheth with less than 1 per cent in the company and he lost control.

Following this, on June 4, Bharati made an open offer to acquire an additional 20 per cent stake in the company at Rs 344 a share. On June 23, ABG Shipyard made a counter-offer to acquire 33.8 per cent in Great Offshore at Rs 375 a share. On the same day, Bharati acquired an additional 14.5 per cent in a bulk deal at Rs 403 a share and later increased its open offer price to Rs 405 a share.

ABG Shipyard then upped the ante by buying an additional 6 per cent in three tranches from the open market and increased its open offer price to Rs 450 a share and finally to Rs 520 a share. The Bharati Shipyard stock gained 10.5 per cent to Rs 177.6 a share on the Bombay Stock Exchange.

The ABG Shipyard stock also gained as it made a profit with the sale of over 3 million  Great Offshore share in the Rs 570 to Rs 580 price range. The stock of the company gained 9.4 per cent to Rs 206.5 a share on the BSE.