HC tells Cadbury, shareholders to settle premium issue

The Bombay High Court has asked Cadbury India and its minority shareholders to settle the issue of premium over the price recommended by Ernst & Young (E&Y) for the chocolate maker’s buyback offer, among themselves, before the next hearing on July 5.

In a court hearing last Friday, lawyers representing minority shareholders asked for a squeeze-out premium over the Rs 1,743 per share price recommended by E&Y, the court-appointed independent valuer. However, Cadbury India’s counsel argued that no control premium should be given to minority shareholders, as the promoters own 97.58 per cent stake in the company. The Bombay High Court asked both parties to meet and amicably resolve the issue.

In its valuation report, E&Y had said a special premium may be required over the Rs 1,743 a share price recommended by the accounting firm. However, it had not quantified the kind of premium that should be given to minority shareholders.

A valuation report from J C Desai & Company submitted by minority shareholders in the court had recommended a 20 per cent premium to the Rs 1,979 a share base value arrived by the accounting firm for Cadbury India. Factoring the premium, J C Desai & Company had recommended per-share value of Rs 2,375.

An e-mail query sent to Cadbury India’s spokesperson on the issue remained unanswered.

Cadbury India’s then UK-based parent, Cadbury PLC, wanted to buy back the remaining stake from minority shareholders at Rs 1,340 a share, as recommended by the two independent valuers appointed by the company — Bansi S Mehta and SSPA. However, minority shareholders were not happy with the company’s offer and had approached the Bombay High Court, which in turn had appointed E&Y to revalue Cadbury India’s shares.

Minority shareholders are of the view that as it is a compulsory buyback from the company, a premium is justified over the price recommended by E&Y.