Cadbury share buyback hurdle remains

Chocolate maker Cadbury India has agreed to pay an equal exit price to all minority shareholders for its buyback programme, irrespective of whether or not they were among the petitioners in a legal tussle to get a higher price.

The company also informed the high court during a hearing here today that it would discuss the demand for a higher exit price with the Investors’ Grievances Forum (IGF), said Hinesh Doshi, vice-president of the investors’ association. “Minority shareholders, whom we are representing, are demanding a minimum of Rs 2,500 per share,” he said. The next hearing of the case is expected in two weeks.

In January, Cadbury had 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 to settle a prolonged court battle.

However, the new offer was not agreeable to all minority shareholders. Some like a Dipak Gidwani, who owns more than 5,000 shares with his family, are in favour of accepting the new offer, considering the time and cost involved in the long 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.

UK-based Cadbury Plc, Cadbury India’s former parent, since 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.