Deepak Fertilisers set to increase open offer bid for MCF takeover

Plans to revise open offer price to beat Mallya-Poddar efforts

Pune-based Deepak Fertilisers, which has been trying for over a year to gain management control of Mangalore Chemicals & Ferilizers, a company promoted by Vijay Mallya's UB Group, is now planning to come up with a revised open offer price for the fertiliser company's shares.

Deepak's decision to go full throttle in its takeover bid comes a day after United Bank of India (UBI) declared UB Group company Kingfisher Airlines and Mallya (pictured) wilful defaulters for non-payment of Rs 400 crore of dues, casting a shadow on Zuari chief Saroj Poddar's plan to jointly own a controlling stake in MCF with Mallya.

After the Pune-based company earlier offered Rs 63 a share, Mallya and Poddar had jointly launched a counter open offer at Rs 68.55 a share. Now, having been declared a wilful defaulter, Mallya might not be allowed to keep a board seat at any company. According to sources, unless he secures a stay on the UBI decision, his agreement with Poddar with regard to MCF might have to be reworked.

Two people with direct knowledge of the matter told Business Standard that Deepak Fertilisers was planning to increase its open offer price. "We will go full steam. We are thinking on the lines of revising our open offer, as it would make sense for stakeholders to tender their shares to us only if the price we offer is higher than what has been offered by the other two suitors," said a person close to the development who did not wish to be named.

"The offer made by Deepak Fertilisers earlier was priced too low. The discussions are at the senior management level and stage seems set for a revised offer," said another person close to the development.

Analysts, too, share these views. They say a revised open offer at this point could give Deepak a lead in the takeover battle. "The Poddar-Mallya counter offer was priced substantially higher than Deepak's open offer. But now, a wilful-defaulter tag on Mallya presents an opportunity to Deepak Fertilisers to come up a with revised price," said a sector analyst with Sharekhan.

The price of MCF shares has been hovering around Rs 70 apiece for some time. That is higher than the prices offered in both the proposed open offers. On Tuesday, the MCF scrip fell 0.66 per cent from its previous close on BSE to end at Rs 68.05.

Mallya, through UB Group, owns 21.98 per cent in MCF, while Poddar holds a 16.43 per cent stake through Zuari. As of the April-June quarter of this financial year, Deepak owned a 25.3 per cent stake in MCF and had proposed an open offer for an additional 26 per cent stake. Poddar and Mallya had jointly made an open offer for a similar stake. While Sebi had last month approved both these open offer proposals, Deepak Fertilisers had received the Competition Commission of India's approval as well.

BATTLE FOR MCF

Apr 2013: Zuari chief Saroj Poddar initially buys close to a 10% stake in MCF with the intent of gaining control of the company

• Poddar makes it clear he is in talks to jointly run the company with MCF Chairman Vijay Mallya

July 2013: Sailesh Mehta-led Deepak Fertilisers makes surprise entry by buying a 24% stake in MCF

• Poddar increases his stake to 16.4% through open-market purchase of shares

April 2014: Deepak further increases its stake to 25.3 %, triggering an open offer

May 2014: Poddar joins hands with Mallya to launch a counter offer

• The Poddar-Mallya open offer is made at Rs 68.55 a share, compared with Deepak's Rs 63 a share