Oracle not to delist i-flex for 5 more yrs

To consider open offer if price falls below Rs 2,100 a share.

Stung by the lukewarm response to its earlier open offer to buy i-flex shares, US-based Oracle has maintained it has no plans to come out with additional open offers for i-flex shareholders for at least the next five years. In a recent filing with the US Securities and Exchange Commission, however, it added a rider stating it may think of an open offer if the share price is below Rs 2,100 per share "" its offer price of December 7, 2006.

Oracle holds 83 per cent of i-flex's shares and has been consistently trying to acquire the rest in a bid to delist i-flex from the Indian bourses. It would require a little over 90 per cent of shares to do so. The move will help it to integrate i-flex with its business worldwide.

Under current norms, if the minority shareholders do not surrender shares willingly to the new promoter, the Securities and Exchange Board of India's (Sebi's) takeover code requires the new promoter to come out with a proposal to buy back the rest of the shares from the minority shareholders under a proposal to delist the company.

The buy-back price is decided on the basis of the market price under the reverse book building process. Reverse book-building requires generating offers from sellers.

However, since its open offers received a tepid response, the US-based firm has reportedly been lobbying the Indian government for over a year to amend the Sebi takeover code. The amendment was aimed at compelling the minority shareholders to surrender the shares of i-flex in favour of Oracle, a government source said.

The amendment was suggested on the lines of the "minority squeeze-out norms" of the US under which minority shareholders of an acquired company are compelled to surrender their shares in favour of the new promoter that has acquired a majority stake. Official sources close to the development said the Indian government did not agree to amend the code.

Commenting on an email query sent by Business Standard, an Oracle Inc spokesperson denied the development. "To be clear, Oracle has not been advised by the government of India to come out with a proposal to delist i-flex and fix the price for buying the remaining 17 per cent shares from Indian shareholders following reverse book building norms," the spokesperson said.

The cost of acquiring the full 17 per cent at the current share price of Rs 2,169 (as on August 3, 2007) would be close to Rs 3,132 crore (around $770 million).

Oracle's cumulative investment in i-flex on May 31, 2007 was approximately $2.1 billion, which consisted of $2,039 million of cash paid for common stock and $30 million in transaction costs and other expenses.

HOW ORACLE ACQUIRED I-FLEX

Nov 2005: Oracle obtained 42.8%; in i-flex solutions for $593 million

Mar-Jun 2006: The company made additional purchases of i-flex common stock through ordinary brokerage transactions

Aug 14, 2006: i-flex board of directors approved a preferential allotment of 4.45 million shares at Rs 1,307.5 per share. Shares issued on September 14 cost Oracle approximately $126 million and increased its ownership to 55%

Sept 12, 2006: Oracle notified public shareholders of i-flex of intention to make an open offer to buy up to 20% i-flex equity at Rs 1,475 a share

Dec 7, 06: Price of the open offer increased by 42% to Rs 2,100 per share

Jan 6, 2007: Oracle accepted the 23 million shares tendered in the offer for approximately $1.1 billion