Ici Spurns Asian Paints Promoters Buyback Offer

Senior representatives of ICI Plc UK have rejected the offer made by the three promoters of Asian Paints the Danis, Choksis and Vakils to buy back the 9.1 per cent stake in the company, which the British paints major has decided to purchase.

They have also indicated to the government and senior leaders of all political parties that Indias reputation as a liberalising economy conforming to a set of transparent rules will take a severe knock, if ICIs legitimate and open acquisition of 9.1 per cent stake in Asian Paints from the secondary market is rejected by Foreign Investment Promotion Board (FIPB).

 

The company would also not hesitate in seeking legal recourse to resolve the issue in its favour. This may give rise to an Enron-like situation with the deal getting bogged down in a long-drawn legal wrangle, corporate observers say.

ICI Plc UK had struck a deal with Kotak Mahindra Capital Company (KMCC) on August 17 to purchase 9.1 per cent stake in Asian Paints, subject to clearance by the Foreign Investment Promotion Board (FIPB). KMCC had purchased these shares from Atul Choksey, who had sold 9.1 per cent shares in the company, held by his family and associates, and retained only 0.4 per cent stake for sentimental reasons.

Ever since the deal hit the newspaper headlines, the remaining promoters of Asian Paints - Ashwin Choksi, Ashwin Dani and Abhay Vakil, have been negotiating with ICI Plc UK to buy back those shares. Simultaneously, they have also decided to reject the transfer of shares to ICI Plc, UK. They now expect that the ICIs application to FIPB seeking clearance to its investment in Asian Paints would be rejected on the ground that they have not approved the British majors share acquisition.

The recent negotiations held between the three promoters Asian Paints and ICI Plc, UK have failed to break the deadlock. The British paints major has assured Danis, Vakils and Choksis that it would not seek a nominee on the companys board and that it was treating the shares acquisition only as an investment made to ensure that the available 9.1 per cent shares did not land up with any of its international competitor in the paints business.

The Danis, Vakils and Choksis, on the other hand, have argued that they would like to get the shares back from ICI Plc, UK and if that did not happen, the transfer of the shares would be refused. The British paints major has argued that the negotiations for purchase of the 9.1 per cent stake in Asian Paints had begun many months back and the promoters were aware of these talks.