Cadbury says no to 30% premium for share price

Cadbury India has informed the Bombay High Court that the 30 per cent premium recommended by the court-appointed valuer Ernst & Young on share valuation of Rs 1,340 suggested by earlier valuators was not acceptable to them as it would jack up the share price further.

This was disclosed to the court on July 6 when Cadbury lawyer said if the company consented to the valuation of 30 per cent premium at Rs 1,743 per share, then it will be treated as 'deemed dividend' payable to shareholders and Cadbury will have to pay dividend distribution tax which will push up the price to a little above Rs 2,000.

The court then asked counsel for both the company as well as shareholders to appear again on July 14 to give their submissions on the matter. Accordingly, the matter would be heard tomorrow by Justice S F Vajifdar.

Cadbury is planning to buy back 2.5 per cent stake from its minority shareholders.

The Investors Grievances Forum, representing Cadbury India's minority shareholders, had earlier opposed the Rs 1,340 per share valuation arrived at by the company-appointed valuers Bansi Mehta & Co and SSPA & Co stating they were not getting value for their money with such lower price.

The court then appointed Ernst & Young as fresh valuers and they suggested 30 per cent premium on earlier share price of Rs 1,340.

Appointing Ernst & Young on April 15 to independently value the shares of Cadbury India, the court had ordered that E&Y report would be binding on both the parties.
       
The court had also asked Cadbury counsel Janak Dwarkadas and shareholders' counsel Pradeep Sancheti to inform the court about their views on the recommendation by July 5.
       
Ernst & Young had submitted their report to the court on June 10, recommending a 30 per cent premium to the valuation arrived at by the valuators appointed by Cadbury.
       
According to Investors Grievances Forum (IGF), Cadbury has 8,088 shareholders in the country and abroad. Of them, 800 are minority non-promoter shareholders. At an extraordinary general body meeting conducted by the company, only 79 of the over 8,000 shareholders were present, it had claimed.
       
The company proposed a share capital reduction scheme whereby 97.4 per cent majority promoter shareholders plan to acquire 2.5 per cent minority shareholding at a price fixed by valuers.
       
Cadbury had earlier claimed that the valuation by Bansi Mehta and Co & SSPA & Co was in conformity with the law laid down by the apex court, pertaining to value of shares, in many judgements.
       
However, the company agreed to get the valuation done by an independent valuer appointed by the court but with a condition that the valuation should be treated as final and binding on all the objectors and shareholders who would not be allowed to pursue their objections later.
       
The HC agreed to their plea.