Mafatlal Weighs Preferential Allotment To Montell

The Arvind Mafatlal Group (AMG) is seriously considering the option of making a preferential allotment to Montell, a 100 per cent subsidiary of Anglo-Dutch multinational Royal/Dutch Shell.

The option may be exercised after Nocil's three divisions, rubber chemicals, petrochemical and plastics, are hived off into three separate companies.

Top sources close to the deal said the idea of preferential allotment makes sense as it kills two birds with one stone.

It will allow Montell to pick up substantial stake in the company and also dilute the Mafatlal holding.

Montell also need not make an open offer as per takeover code regulations to pick up a further 20 per cent stake from the public.

 

The takeover code exempts investors from an open offer if the stake is picked up through preferential allotment or a rights issue. AMG now holds 44 per cent stake in undivided Nocil. Nocil has been looking for a joint venture partner to complete its expansion plans for more than two years.

Earlier, the Mafatlals wanted to sell out their completely in Nocil.

This did not work out as Montell did not want some of businesses of Nocil and was unwilling to pay a high price.

The Mafatlals then hit upon a plan of splitting the company into three.

While petrochemicals consisting the cracker will be sold to Montell, the Mafatlals will retain the plastics business.

The rubber chemicals business was to be hived off separately.

It is now learnt that tyre major Apollo Tyres is close to buying out the rubber chemicals business. Details of the preferential allotment were not available. Sources said it is being debated within the group and a final decision will be taken soon. Documentation is currently in progress and the deal is likely to be sealed in the next three months, they added.

Sources, however, pointed out that the modalities of trifurcating Nocil and sale of rubber chemicals will be completed within two months.

Industry sources say, "Montell would like be with its Indian partner till such time when the expansion of the mother cracker is being executed".

After that, Mafatlals are expected to exit completely by selling their shares to Montell. However, there is trouble looming ahead for the Mafatlals.

Financial institutions are yet to give the final go-ahead for the restructuring. A senior executive from a leading financial institution points out that, "no such proposal has been placed before them." The sources warn that it will not be easy for Mafatlals to sell the rubber chemicals without their consent. Besides, the proceeds from the sale, if any, will have to be used by the company for reducing debt" and not for investment anywhere else, they add. Financial institutions hold close to 30 per cent of Nocil's equity.