Sandoz Shareholders Reject Swap Ratio

At an extraordinary general meeting in Mumbai, the shareholders voted in favour of an amended resolution agreeing in principle to merge with Hindustan Ciba-Geigy, but wanted the share swap ratio to be determined afresh.

There is a likelihood of the shareholders' body approaching the Mumbai High Court in an effort to appoint one or two valuers to determine a fair exchange ratio.

The rejection of the swap ratio is seen by the market as a trend-setting development, which will have a bearing on several other mergers that are due in the coming months in the pharmaceuticals sector as also in other industries.

 

The YB Chavan auditorium in south Mumbai, where the extraordinary general meeting was held, was packed as minority shareholders of Sandoz India were present at the venue of the meeting in large numbers. The shareholders had already organised themselves into a shareholders body, Sandoz (Minority) Shareholders Association, to mobilise public support for their cause.

Even as the Sandoz management accepted the minority shareholders' rejection of the swap ratio as a manifestation of corporate democracy, consumer activists and ordinary investors welcomed the development.

Reacting to yesterday's developments, John Symon, M D of Sandoz India and present designated head of Novartis, said that this is just a part of corporate democracy. He said if the minority shareholders felt aggrieved with the decision, they had a right to voice it.

The move, according to market sources, is a crucial step at a time when the minority shareholders have in several cases been sidelined or not effectively heard on issues relating to the shareholding pattern, takeover code or other issues,

Managing trustee of Consumer Education and Research Centre, Manubhai

Shah, told Business Standard: "It is a very positive development that minority shareholders have started organising themselves and studying issues like this."

Kiran Mehta, president of Sandoz (minority) shareholders association, argued that the share exchange ratio arrived at by the earlier valuers was biased.

Three valuers had been appointed earlier - Arthur & Andersen, Coopers and Lybrand and Bansi Mehta. According to Kiran Mehta, both the foreign consultants gave a wide berth to the past performance and stock values of the companies.

He said that although Bansi Mehta had considered these two factors, he had not given them due weightage. "In sharp contrast to this case, in the Nicholas-Boehringer valuation, he had given a 40 per cent weightage to past performance, 40 per cent to share market price and 20 per cent to surplus land," Mehta added. He said that the valuation had such obvious differences that they could not be reconciled.

The Sandoz scrip opened at Rs 184 on the BSE and closed at Rs 188. The HCG stock also gained marginally, closing at Rs 2755 on the BSE.