Akzo Nobel shares rise on buyback plan

Offers to buy back share from minority shareholders to review royalty arrangement with parent

After institutional investors raised governance issues against a proposed plan to merge unlisted entities, the promoters of paint maker Akzo Nobel India have offered juicy exits to a few of them.

The promoters have used the creeping acquisition route to buy significant stakes from a few dissenting shareholders, including mutual funds. “We have sold significant shares to the promoters. But, we have not exited fully,” said a senior official from one of the institutions, which held over one per cent at the end of December.

Business Standard could not independently verify the price, but experts said such deals are stuck at a premium to the market price. Akzo Nobel shares gained 10 per cent on Friday to close at Rs 900 apiece.

On January 31, the promoter entity Imperial Chemical Industries (ICI), which had 56.4 per cent at the beginning of the quarter, bought 3.23 per cent, taking its share holding to 59.6 per cent, a company filing said.

This is the second attempt at buying out the dissenting shareholders. Earlier, Bajaj Allianz Insurance, which held 1.21 per cent in the company as of December, had sold a significant stake in January, according to people familiar with the development.

In addition to the informal exits offered to the institutions, the company said it would “evaluate the possibility of a share buyback proposal from minority shareholders for implementation at the earliest opportunity” at its board meeting on February 14. It also agreed to examine a proposal for review of the royalty arrangement with its global parent Akzo Nobel NV.

“Akzo Nobel India has a long-term constructive relationship with all its shareholders,” the company said in a statement. The above proposals follow the company “taking cognizance of views expressed by some shareholders”, it said.

Last October, the company’s board approved the merger of the three unlisted firms — Akzo Nobel Coatings India, Akzo Nobel Car Refinishes India and Akzo Nobel Chemicals — with the listed entity. The merger done through a court approved scheme of amalgamation has reached a crucial stage with the court having called a shareholders’ meeting on February 7.

A section of institutional investors, who control nearly a quarter of the company between them, objected to the proposal. According to them, the listed firm will absorb three unlisted group companies at a higher valuation, thereby, increasing foreign promoter's shareholding.

“We were not given any details about the subsidiaries. This is definitely not a good thing,” said one of the investors.

On the buy back, the investor said, “We were expecting they will offer an exit. Whenever the buyback offer comes, if the price is attractive, we will tender our shares.”

Asian paints (5.46 per cent), ICICI Prudential Life (4.37 Per cent), LIC (3.88 per cent), UTI MF (2.17 per cent) GIC ( 2.08 per cent) and SBI Mutual Fund (1.18 per cent) were among the top non-promoter shareholders in the company.

A mail sent to Asian Paints elicited no response till the time of going to press. However, a person familiar with the development said that the company would wait for the court-appointed meeting on February 7 to take a call on the matter.