Emami, Zandu to settle row out of court

After five months of heartburn over a hostile takeover bid, Kolkata-based Emami and Mumbai-based Zandu Pharmaceuticals have decided to settle the issue out of court. The deal, say sources, is likely to be concluded soon with the Emami Group close to buying out the Parikhs' stake in Zandu.

When contacted, Zandu Managing Director Girish Parikh declined to comment on the issue. Emami Director Harsh Agarwal was not available for comment.

Emami had earlier picked up the Vaidya family's stake in Zandu, while the Parikhs were trying to shelve Emami's takeover bid. The company's stock was down 17.15 per cent on the Bombay Stock Exchange to close at Rs 230 today.

For Emami, Zandu will be a major move after it acquired Himani a few decades ago. Emami, last year, unsuccessfully bid for Indonesian company Unza, which was finally taken over by Wipro. Emami's portfolio includes hair-care and skin-care products such as Navratna oil, Boroplus anti-septic cream and Fair and Handsome Cream. Zandu Pharma has some ayurvedic health-care products and brands under its belt with R&D and marketing expertise.

The Vaidya family, one of the promoters of Zandu, had sold its 24 per cent stake in the company to Emami for Rs 6,900 a share. Emami had bought another 3.5 per cent stake from the market and had launched an open offer for the company at Rs 7,315 a share. Emami soon revised the price at Rs 16,500 a share (face value of Rs 100), after which, according to sources, some of the Parikh family members evinced their interest in exiting the company because they felt they were getting the best price possible, especially after the offer price was more than doubled.
 

A BLOW-BY-BLOW ACCOUNT

May 30 : Emami increased its stake in Zandu to 27.5% from its earlier holding of 3.5%

Jun 1 : Emami announced open offer to buy stakes up to 20%

Jun 6 : Emami forces Zandu to drop preferential issue

Jun 21 : Parikhs ups stake to counter Emami offer, taking their total stake to 22%

Aug 8 : Zandu-Emami row head for Company Law Board (CLB). In its order dated August 7 Bombay High Court directed CLB to decide on Zandu's application

Aug 27 : CLB refers Zandu issue back to Sebi

Sept 15 : Emami nearly doubled its open offer to acquire a 20% stake in Zandu

Sept 17 : Emami approached CLB requesting to stay the board meeting of Zandu for inducting new members on its board of directors

Oct 3 : Emami further revised the open offer price for purchasing 20% stake in Zandu within a fortnight after Emami doubled the offer price

The Parikhs, according to NSE data, directly hold 20.18 per cent in Zandu. Sources say approximately 20 per cent more is held through the group, as well as associate companies. Acquisition of a controlling stake in Zandu, including the buyout of the Vaidyas' 24 per cent and the open offer at Rs 16,500 a share, may cost the Emami group about Rs 900 crore, which includes paying a non-compete fee as well.

The open offer is aimed at gaining control of Zandu. Emami would raise its stake to 47.5 per cent and take control of the company from the Parikh family, which manages Zandu now. About 84 members of the Parikh family own around 18 per cent in Zandu.

The Zandu management, led by the Parikh family, was fighting to stave off Emami's takeover bid. They had increased their holding in Zandu to 20.19 per cent by buying shares from the market and had moved Sebi and CLB against the acquisition. The City Civil Court of Kolkata had adjourned Zandu's annual general meeting scheduled for September 24.