After the failed attempt to restructure Madras Aluminium Company Ltd (MALCO) by merging it with Sterlite Industries in September 2008, its proposed delisting is set to attract a fresh round of investor ire.
Investors have alleged that the maximum price offered of Rs 105 per share, under the delisting proposal, is against the spirit and intent of the Reverse Book Building (RRB) guidelines of the Securities and Exchange board of India (Sebi).
In the public announcement, dated February 25, 2009, the company stated, “The board of directors of MALCO approved a price not exceeding Rs 105 per share for delisting the company.”
According to clause 8(2) of the guidelines, the offer price shall have a floor price and no ceiling price, says Anil Jindal, director of Jindal Securities. The company has filed complaints with ICICI Securities, advisor for the delisting.
Kishor Ostwal, managing director of CNI Research, said that for delisting, the acquirer might give an indicating price band but not a ceiling. “If the company has already fixed the price ceiling, then what is the price discovery mechanism?”
However, the public announcement states that the board approval of Rs 105 per share should in no way be construed as any restriction on the ability of the board of directors of the acquirer to modify the resolution.
In the delisting guidelines, there is mention of only floor price, discovered price and the exit price. This price of Rs105 is none of these and cannot be a part of the public announcement, said Jindal. Even in the notice to the shareholder, there was no mention of Rs 105, said Jindal.
In the case of iFlex Solutions, acquired by Oracle in 2005, the acquirer couldn’t delist the share as the US software giant did not accept the discovered price, which was much above the indicative price band.