Pipavav deal: Reliance Infra makes Rs 1,263-cr open offer

Anil Ambani recently visited the Gujarat facilities of Pipavav and told its 4,000 employees that he would make it the country's biggest defence manufacturer

Taking forward its proposed takeover of Pipavav Defence, Reliance Infrastructure on Tuesday made an open offer for acquisition of further 26 per cent stake from public shareholders for Rs 1,263 crore.

The open offer made by Reliance Defence Systems and Reliance Infrastructure, for purchase of over 190 million shares, has been made at a price of Rs 66 each, according to the offer documents filed with the markets regulator Securities and Exchange Board of India (Sebi). Pipavav shares on Tuesday closed four per cent down at Rs 61.3 at the BSE.

The public announcement for the open offer would be published in newspapers on Wednesday, which is mandatory according to Sebi regulations.

Recently, Reliance Infra reached an agreement with the Pipavav promoters for acquisition of 130 million shares, amounting to 17.6 per cent stake, for Rs 819 crore.

Besides, the sellers have also agreed to sell an additional number of equity shares at the same price (for up to Rs 354 crore) to take the total stake of Reliance Infra to 25.10 per cent, after taking into account the acquisition made under the open offer. Since Reliance Infra has entered into an agreement to acquire voting rights in excess of 25 per cent of the total voting rights of Pipavav, the Sebi norms mandate an open offer to be made for public shareholders to buy 26 per cent stake. The open offer is subject to statutory approvals from fair trade watchdog Competition Commission India, Gujarat Maritime Board and other authorities.

The proposed acquisition of controlling stake in Pipavav is part of Anil Ambani-led Reliance Group’s recently announced foray into defence sector. Ambani recently visited the Gujarat facilities of Pipavav and told its 4,000 employees that he would make it the country's biggest defence manufacturer.

The open offer price has been arrived at in accordance with the relevant Sebi regulations.

Upon completion, the existing promoters will cease to be promoters and Reliance will become the new promoter of Pipavav Defence with sole control. The offer is also subject to certain Conditions Precedent as per the Purchase Agreement between Reliance and the Promoters of Pipavav Defence. These include no material adverse event occuring till the completion date and no material change in the laws or threatened litigation relating to business of Pipavav Defence.

It would also require approval for change in Articles of Association by the shareholders of Pipavav Defence, receipt of consents from lenders, completion of CDR package, among others.