TAKE-OVER OF MOUNT EVEREST MINERAL WATER BY TATA TEA
PC_1/C/MYD/AG
13th June 2007
To,
The Managing Director
Tata Tea Ltd
1, Bishop Lefroy Road,
Kolkata: 700 020
Dear Sir,
Reg: Open Offer of Mount Everest Mineral Water Ltd.
I have gone through the Public Announcement (P.A.) to the shareholders of Mount Everest Mineral Water Ltd. published in the Financial Express (Mumbai Addition) on 4th June 2007
The essence of the SEBI (SAST) is that the small shareholders should not be discriminated against. I find your Open offer fails to meet this basic test. The Open Offer price i.e. price offered to the small shareholders must be revised as follows:
1. Rs. 30 million will be paid to the seller as non compete fees for selling 31.1 lacs shares i.e. about Rs.9.65 per shares. This amount should also be paid to the small share holders. See arguments below “A”
2. Since Sellers a/c will be credited for interest. Same interest should be added to the purchase price of Rs. 140/- to the open offer price.
3. The put option available to the seller should be evaluated & monitised and paid to the small shareholders. In my rough estimation the value of such put option could be anything between Rs. 50-100/- .
4. Alternatively the same put option must be given to all the shareholders for the no. of shares accepted in the Open Offer.
“A”
Payment of non-compete fees
a) Why the mighty House of TATAs are scared of competition from The Sellers of a company whose performance has been very dismal and disappointing in its whole of more than 15 years of existence. For the year ended 31st March 2006 it could achieve net sales of only Rs. 16.38 crores and an EPS of Rs. 0.38.
b) The non-compete fees is payable to persons not because they are having any particular expertise but because of their selling the shares that they own. Clause 6C of the PA states “the acquirer has agreed to pay to the seller non compete fees of RS. 30 million”.
c) Since the basis on payment of Non-compete fees is based on the ownership of shares, it does not necessarily mean the capability of the person to compete. Such ownership may rest even with artificial persons or minors.
d) The Managing Director Mr. Salim Govani is not getting any non compete fees, although the so called expertise must be resting with him
e) The sellers will continue to be part of promoters with right to appoint 2 Directors on the board and 50% of their current share holding intact even after the takeover, as such they are obliged to work for the betterment of the company and not compete with it.
f) The Corporate Governance should take care of any conflict of interest that the Directors and /or Promoters may have with the company. Any consideration paid to ensure their good conduct may amount to bribery and corruption.
g) There are further general arguments against the payment of Non- Compete fees:
I. In case of takeover, be it hostile or friendly, there is no need or justification for the payment of such a fees.
II. if the takeover is hostile –where is the need to honour a loser?
III. in case of a friendly takeover, it can clearly be a part of the agreement since the seller might not be interested in the business for one reason or the other.
IV. The amount being paid as “non Compete fees” is paid for the concern and not for the individual. As a co owner, why should the small shareholders be denied the benefit?
V. When the acquirer is acquiring the concern, where is the need for paying such a fee?
VI. The expertise that the seller is supposed to have acquired is during the tenure of serving the company as an ED or MD for which a very rich reward is paid to them.
VII. If the individual expertise is so great it can be retained by the new acquirer for future use, on a more attractive salary
VIII. It is a NATIONAL WASTE to debar such a great expertise from being used for the greater good of the nation.
Thanking you,
Yours faithfully
Arun Goenka
C.C.
1. DSP Merrill Lynch Ltd.
10th Floor, Mafatlal Centre,
Nariman Point, Mumbai: 400 021
PC_1/C/MYD/AG
13th June 2007
To,
The Chairman
SEBI
Plot No. C4-A, ‘G’ Block,
Bandra Kurla Complex
Bandra (E), Mumbai: 400 051
Dear Sir,
Reg: Open Offer of Mount Everest Mineral Water Ltd.
Recently I had the opportunity of hearing you personally in the India investment show at Nehru Centre. Your emphasis on Investor education and focus on Small shareholders has encouraged me to continue with my little efforts in the area of investor protection, especially with regard to open offers. My crusade against unfair treatment against Small shareholders in this sphere in now 3-4 years old and my friends now call me ‘Take-overwatchman’.
I have been giving SEBI Several representations. While I am happy that complaints lodged with SEBI are usually acted upon, the interaction leaves much to be desired. I have even taken shelter under RTI, yet SEBI refused to give me information, in the case of Takeover of Falcon Tyres & Dunlop. The matter is now pending in CIC New Delhi. At New Delhi also there has been several dates but no hearing. It is quite a frustrating experience. Shall request you to look into this aspect of sharing information with watchful shareholders like me who do it not for any personal agenda or because of any personal enmity with any particular group but as class action.
Please find attached my letter written to Tata Tea Ltd. For your immediate action.
Thanking you,
Yours truly,
Arun Goenka
goenkaarun@gmail.com
21st July, 2007
Mr.D.K.Sen,
Vice President & secretary,
Tata Tea Ltd.
1 Bishop Lefroy Road,
Kolkata 700020.
Dear Sir,
Sub- Takeover of Mount Everest Mineral Water Ltd.
I Thank You for your letter No. SEC/MEMW/379 dated June 29, 2007. At the outset, I would like to introduce myself as a humble “takeover watchman”. I am inspired by Doctors giving free treatment to poor patients. I also thought of making available my expertise for general public. You have rightly observed that I became a shareholder after the public announcement was made. If you probe further you will find that the total no of shares acquired by me are meager. The same is the case in almost all the cases that I take up. This I am clarifying to bring home the point that my such objections are much in nature of public service. Some of the cases wherein I have intervened and got little advantage to the general shareholders are given below.
a) Castrol—where all the shareholders received interest,
b) IPCL—where Reliance was forced to make the payment to the share holders about 18 days prior to the scheduled date because of I had raised the point that otherwise they will have to pay the dividend to all the shareholders since the record date was coming in between,
c) Colour Chem—for payment of interest to all shareholders. Unfortunately the Supreme Court could not be impressed and investors/SEBI lost the case.
d) Tata Infomedia and others were made to give more and better disclosures.
e) The issue of payment of Non-compete fees in an unjustified manner was also raised probably, first by me and in a recent case Mysore Cement Ltd. SEBI has disallowed such a payment.
f) SEBI directive to Ruia group to come out with Open offer for Dunlop & Falcon Tyres.
You have very candidly admitted that in your mind promoters are a privileged lot. They are not so while implementing the SEBI Takeover code. There is a fundamental conflicts of views when you say “promoters of a company are distinct and unique when compared to a retail shareholder”. I have written at beginning of the letter letter no.PC_1/C/MYD/AG. dated 13th June 2007. “The essence of the SEBI (SAST) is that the small shareholders should not be discriminated against.” That is at least for 20% of the share proposed to be acquired under Open offer the retail shareholder need to be treated at par with the promoter/sellers and all the benefits under the terms of acquisition must be passed on to the retail shareholders be it -—interest, Put option or Unjustified Non-compete fees.
Kindly note my point wise reply to your other points.
Payment of non-compete fees.
i. The legality of such payment is fully accepted. I have only raised doubts on the justification and consequent allowability. I hope you are aware that SEBI has disallowed payment of non-compete fees by Heidelberg to Shri S.K.Birla group in the case of takeover of Mysore Cement Ltd. The competence of the sellers to command non compete fees is not displayed either in top line or bottom lime. In the 15 years of its existence. For the year ended 31st March 2006 it could achieve net sales of only Rs.16.38 crores and an EPS of Rs. 0.38.
ii. If the source of water is unique you will acquire it when you acquire the company and that is reflected in the purchase price and need not be given separately as non-compete fees.
iii. You have admitted here that the event that would merit payment of non-compete fees have not yet occurred.
iv. In a commercial transaction knowledge is paid for when it can be converted into money. Apart from your perception about the knowledge of the promoters there is no tangible proof about such knowledge. In the 15 years of its existence. For the year ended 31st March 2006 it could achieve net sales of only Rs.16.38 crores and an EPS of Rs. 0.38.
v. You have admitted that non compete fees is being paid to the sellers. At best as per your statement, through the sellers to Mr.Salim Govani, indirectly. In this case if the expertise lies with Mr. Salim Govani, then the Non- Compete fees should be paid to him directly. Why he should be forced to share it with the other shareholders of his co. Foresight Holdings Private Ltd. Who is the seller. Clause 6C of the PA states “the acquirer has agreed to pay to the seller non compete fees of Rs.30 million.”
vi. While denying that it tantamount to bribery and corruption, You have not answered why the corporate goverence cannot take care of any conflict of interest that the Directors and promoters may have with the company.
You have rightly stated that since the selling promoters will remain partly invested in the company they will endeavor to enhance the performance of the company. This will further strengthen my point that payment of non compete fees is highly unjustified.
Yours faithfully,
Arun Goenka
Sunday, September 9, 2007
Thursday, March 22, 2007
Proposed Regulations “SEBI (Delisting of Securities) Regulations, 2006”
At the outset I would have expected SEBI to come out with some amendment in the process of Reverse book building rather than scrap it. The Reverse Book Building process is a good concept and passes the test of ‘equity’. It should be adopted with some modifications.
I find the following observation of SEBI, not acceptable.
a) In the preamble of the proposed change it is written in 2(a) “Disproportionate Powers with public share holders holding major chunk” this is not correct because the powers are directly in proportion to number of shares held, if this is changed then the process of equity & natural justice would be negated. My suggestion seeks to take care of the situations that might have prompted this statement.
b) In clause 2(b) it is stated “Possibility of frivolous Bids to destabilize the delisting offer” It is not correct to label bids as frivolous. No bids can be frivolous since they are backed by actual amount invested.
It seems that SEBI by the proposed Regulation, is favouring delisting of more cos. Which should not be the case. At various places suggestions have been made to take care that listing is encouraged.
PRICING MECHANISM
It was seen in the past in some cases that due to some large investors the entire process of delisting failed. Although , I do not want to take away from such large shareholders, their right to bid at a price they think fit, but I would like to give an opportunity to the other small share holders and the promoters as well to proceed ahead with what they think is fair price. The pricing mechanism should be altered to as follows:
a) The minimum exit price should be at 25% premium to the floor price, as suggested in the present draft.
b) The price discovery as per the present guideline on Reverse Book Building that gives the rate at which maximum no. of shares are offered
c) The rate at which maximum no. of shareholders have offered the shares. This will take care of a few shareholders holding major chunk and unduly flexing their muscles.
In case the highest discovered price is not acceptable to the promoter, they may indicate the price acceptable to them which could be either of a),b) or c) above.
The shareholders will have the choice to either accept or reject such price offered by the promoters.
ABSENCE OF MINIMUM SUBSCRIPTION
In the present circumstances & even in the draft, the offer fails if a minimum threshold is not reached. It must be appreciated the whole exercise is quite cumbersome & costly. The promoters & the investors both must be given an option to accept shares tendered even when the minimum threshold is not reached and the company does not become eligible for delisting. Might be the offer should be named “ Open offer with delisting option”
Since in any case the promoters are following the guideline given under SAST for consolidation of their holding.
However in such a case, it should be made a condition that after such offer and acceptance, in case the promoters come again with another delisting offer or purchases shares at a higher price within a period of 3 years, then, such higher price should be paid to the shareholders who had earlier accepted the offer at a lower price.
COMMENTS ON VARIOUS OTHER CLAUSES OF THE DRAFT
a) Clause 4(5) doesn’t permit delisting of convertible securities. This should be omitted.
b) Clause 10(1) Public announcement is directed to be issued in one English and one Hindi, national dailies & one regional language news paper of the region where the concerned stock exchanges are located.
This should be changed to regional language newspaper of the place where the registered office of the company is situated or the place where there is highest concentration of individual shareholders.
This is on the premises that the stock exchanges are located in metro cities & the investors living there are by & large much better educated & informed as compared to some rural areas where the factory of the company may be situated and workers etc. may be holding a significant chunk of shares.
c) Clause (6) Term associate should be defined .
d) Clause 12(1) The responsibility for dispatch of letter of offer has been cast on the promoters only whereas the responsibility for public announcement (refer clause 10(5) ) has been cast on promoters & merchant bankers jointly. Uniformity must be maintained at both the places and merchant banker should be added at 12(1).
e) Clause 14(4) (b) states that fair value of the securities should be determined by registered Credit Rating Agency, whereas clause 21(1) states that stock exchange shall appoint independent valuer. The term valuer has been defined to mean a Chartered Accountant or Merchant Banker.
Uniformity should be maintained throughout the regulation & the term valuer should be replaced at 14(4) (b) instead of Credit Rating Agency and explanation to 21(1) (a) defining the word valuer should be modified to include, Chartered Accountant, Merchant Banker or Credit Rating Agency.
f) Clause 24(1) debars for a period of seven years any delisted securities from relisting. Seven years period is too long and serves no purpose. This should be reduced to three years . Or alternatively one year with a rider that in case of any relisting proposal, within the next 3 years, the earlier shareholders must be given the opportunity to participate in the same manner as ‘Rights issue’
Hope the above suggestions will find merit and duly incorporated in the proposed Regulations.
I find the following observation of SEBI, not acceptable.
a) In the preamble of the proposed change it is written in 2(a) “Disproportionate Powers with public share holders holding major chunk” this is not correct because the powers are directly in proportion to number of shares held, if this is changed then the process of equity & natural justice would be negated. My suggestion seeks to take care of the situations that might have prompted this statement.
b) In clause 2(b) it is stated “Possibility of frivolous Bids to destabilize the delisting offer” It is not correct to label bids as frivolous. No bids can be frivolous since they are backed by actual amount invested.
It seems that SEBI by the proposed Regulation, is favouring delisting of more cos. Which should not be the case. At various places suggestions have been made to take care that listing is encouraged.
PRICING MECHANISM
It was seen in the past in some cases that due to some large investors the entire process of delisting failed. Although , I do not want to take away from such large shareholders, their right to bid at a price they think fit, but I would like to give an opportunity to the other small share holders and the promoters as well to proceed ahead with what they think is fair price. The pricing mechanism should be altered to as follows:
a) The minimum exit price should be at 25% premium to the floor price, as suggested in the present draft.
b) The price discovery as per the present guideline on Reverse Book Building that gives the rate at which maximum no. of shares are offered
c) The rate at which maximum no. of shareholders have offered the shares. This will take care of a few shareholders holding major chunk and unduly flexing their muscles.
In case the highest discovered price is not acceptable to the promoter, they may indicate the price acceptable to them which could be either of a),b) or c) above.
The shareholders will have the choice to either accept or reject such price offered by the promoters.
ABSENCE OF MINIMUM SUBSCRIPTION
In the present circumstances & even in the draft, the offer fails if a minimum threshold is not reached. It must be appreciated the whole exercise is quite cumbersome & costly. The promoters & the investors both must be given an option to accept shares tendered even when the minimum threshold is not reached and the company does not become eligible for delisting. Might be the offer should be named “ Open offer with delisting option”
Since in any case the promoters are following the guideline given under SAST for consolidation of their holding.
However in such a case, it should be made a condition that after such offer and acceptance, in case the promoters come again with another delisting offer or purchases shares at a higher price within a period of 3 years, then, such higher price should be paid to the shareholders who had earlier accepted the offer at a lower price.
COMMENTS ON VARIOUS OTHER CLAUSES OF THE DRAFT
a) Clause 4(5) doesn’t permit delisting of convertible securities. This should be omitted.
b) Clause 10(1) Public announcement is directed to be issued in one English and one Hindi, national dailies & one regional language news paper of the region where the concerned stock exchanges are located.
This should be changed to regional language newspaper of the place where the registered office of the company is situated or the place where there is highest concentration of individual shareholders.
This is on the premises that the stock exchanges are located in metro cities & the investors living there are by & large much better educated & informed as compared to some rural areas where the factory of the company may be situated and workers etc. may be holding a significant chunk of shares.
c) Clause (6) Term associate should be defined .
d) Clause 12(1) The responsibility for dispatch of letter of offer has been cast on the promoters only whereas the responsibility for public announcement (refer clause 10(5) ) has been cast on promoters & merchant bankers jointly. Uniformity must be maintained at both the places and merchant banker should be added at 12(1).
e) Clause 14(4) (b) states that fair value of the securities should be determined by registered Credit Rating Agency, whereas clause 21(1) states that stock exchange shall appoint independent valuer. The term valuer has been defined to mean a Chartered Accountant or Merchant Banker.
Uniformity should be maintained throughout the regulation & the term valuer should be replaced at 14(4) (b) instead of Credit Rating Agency and explanation to 21(1) (a) defining the word valuer should be modified to include, Chartered Accountant, Merchant Banker or Credit Rating Agency.
f) Clause 24(1) debars for a period of seven years any delisted securities from relisting. Seven years period is too long and serves no purpose. This should be reduced to three years . Or alternatively one year with a rider that in case of any relisting proposal, within the next 3 years, the earlier shareholders must be given the opportunity to participate in the same manner as ‘Rights issue’
Hope the above suggestions will find merit and duly incorporated in the proposed Regulations.
Allsec Technologies Ltd.
In the mandatory annoucement the acquirers announced that Open offer of Allsec Technologies Ltd. received a response of 2.77% as against the Offer of 20%. This was because of the market price being higher than the offer price.
This is not an isolated case and there are many such issues where the Offer Price were lower than the Market price and yet they have managed to receive couple of lacs shares.
Why would someone surrender shares at a price lower than Market Price? Specially when surrender is distinctly disadvantageous as compared to selling in the market because
(a) Payment is delayed
(b) Uncertainty as to the no. of shares that will be accepted
(c) Price risk at the time of receipt back of unaccepted shares
(d) loss of tax benefit because STT is not paid.
This could be another scam and needs to be investigated properly, not only for Allsec Technologies Ltd. but for all such cases.
This is not an isolated case and there are many such issues where the Offer Price were lower than the Market price and yet they have managed to receive couple of lacs shares.
Why would someone surrender shares at a price lower than Market Price? Specially when surrender is distinctly disadvantageous as compared to selling in the market because
(a) Payment is delayed
(b) Uncertainty as to the no. of shares that will be accepted
(c) Price risk at the time of receipt back of unaccepted shares
(d) loss of tax benefit because STT is not paid.
This could be another scam and needs to be investigated properly, not only for Allsec Technologies Ltd. but for all such cases.
Punjab Tractors Ltd
The recent take over of Punjab Tractors (PTL) which necessitated the open offers for other cos. E.g. Swaraj Automotives and Swaraj Engines. But no open offer for Swaraj Mazda. It should be examined if Open offer for Swaraj Mazda also should have come. Say if PTL is holding 20% ( the actual figure reported is 14%) in Swaraj Mazda and M & M has acquired 60% in PTL then M & M is supposed to have acquired 20% in Swaraj Mazda or 60% of 20% i.e. 12%. More over was PTL controlling Swaraj Mazda? If yes than will it mean Swaraj Mazda will now be controlled by M &M or continue to be controlled by PTL who might be now controlled by M & M?
Devaki Hospital
In the current open offer of Devaki Hospital Ltd. the price offered is Rs. 19/-, but if you look at the 26 weeks data, you will find that there have been abnormally high volume in the weeks ending 5th , 12th , 19th & 26th May 2006, on 19th May 2006 the volume of shares was 27,83,932 lacs at a rate as high as Rs. 32.90 and low of Rs. 29.10 as against average volume of about 50,000 shares per week at an average rate of around of Rs. 15-16.
This raises doubt in the mind that this heavy transaction in the above 4 weeks and subsequently in the week ending 8September’06, just before the take over, must have been undertaken by the interested parties—The Acquirers / PAC. The Acquirers have disclosed a block deal of only 5.30 lacs on 8th September’06 out of a total volume of more than 15.5 lacs shares on that date.SEBI should investigate and establish whether these shares were bought by the acquirer /PAC directly or indirectly and if so than the highest rate of Rs. 32.90 should be paid to all as per the regulations. It should be checked where the shares bought in the month of May’06 are lying as on date.
This raises doubt in the mind that this heavy transaction in the above 4 weeks and subsequently in the week ending 8September’06, just before the take over, must have been undertaken by the interested parties—The Acquirers / PAC. The Acquirers have disclosed a block deal of only 5.30 lacs on 8th September’06 out of a total volume of more than 15.5 lacs shares on that date.SEBI should investigate and establish whether these shares were bought by the acquirer /PAC directly or indirectly and if so than the highest rate of Rs. 32.90 should be paid to all as per the regulations. It should be checked where the shares bought in the month of May’06 are lying as on date.
Update on Mysore Cement
•In the mean time the Acquirers have completed the formalities of Open offer and as was apprehended got very poor response. Instead of the offer size of 35 Crores Shares only 0.68 Crore shares were tendered. Now even if they lose out they will be making off with approx Rs.40 crores of investors’ money.
Saturday, January 13, 2007
Mysore Cement --Takeover by Heidelberg Cement AG
The take-over of Mysore Cement Ltd. By HeidelbergCement AG and the subsequent Open offer is quite unfair to the small shareholders. An application has been filed in SAT for redressal of the grievances. Some key points to note are as follows:
I am aggrieved by the way the order of Hon’ble SAT is sought to be implemented. A letter dated 22nd December was written to The Chairman, SEBI urging him to effectively implement effectively implement the order or else the whole thing will become a farce.
I had written a letter no. Dated 22nd December 2006 to SEBI to that suitable ways must be found to effectively implement the order otherwise the whole thing will become a farce. All the shareholders must be given an option to accept the offer
i. @ Rs.58 or higher i.e. at the present rate and condition or
ii. Only @ Rs. 72.50 i.e. only if the Non-compete fee of Rs.14.50 is also paid/payable.
The Hon’ble SAT order will be infructuous unless the above suggestions or other such measures are taken to effectively implement the same. The Respondents are simply pretending to implement without really intending to do so. The Respondents did not honestly want to implement the order of the Hon’ble SAT is evident from the fact that no action has been taken on such a suggestion. Since the offer price is less than the market price shareholders will not tender their shares in the open offer and as a result will not be entitled to get the additional Rs.14.50 and otherwise the shareholders will lose Rs.4 per share by tendering the shares at a rate lower than the market rate.
This will result in a great loss to the common share holders and undue enrichment to the Acquirers who are large Foreign bodies corporate. It is only a ‘win-win’ situation for them, and ‘lose-lose’ situation for the general investors. In case the shares are tendered now and even if the Acquirer's challenge to the SEBI direction be unsuccessful, the shareholders will not receive the full Rs.14.50 because they would have already lost Rs.4 per share being the differential between the offer price of Rs.58 & Market price of Rs.62. In case the Acquirers win, then also the investors who tendered the shares in the open offer would lose @ Rs. 4 per share. Their share would have been acquired by the acquirers at Rs.4 lower than the market price.
The above typical situation has arisen because of the Respondents’ evil design to take maximum advantage from every situation at the cost of fair play and justice and loss to others. They have not placed full facts in front of the hon’ble SAT while seeking relief.
The Respondents on the other hand will always gain Rs.4 per share having bought the share @ 58 which otherwise would have cost them Rs.62 in the market. The Respondents has already displayed their desire to hike their stake/ shareholding in the target company by coming up with an Open offer for a higher % age than the mandated 20% as per the law.
Such a loss to the shareholders in the hands of foreign bodies corporate is also a National loss since the additional cash flow that would have come into the country will not come because of the above evil design of the Acquirers.
Relieves sought
The Open Offer in its current form is a fraud on The Hon’ble SAT and the shareholders/investors at large.
a. The Acquirers must be directed to immediately give an option in the Letter of Offer and ‘Form of acceptance –cum-acknowledgement’ allowing the shareholders to accepted the offer
i. @ Rs.58 or higher i.e. at the present rate and condition or
ii. Only @ Rs. 72.50 i.e. only if the Non-compete fee of Rs.14.50 is also paid/payable.
b. Inform all the shareholders by means of News paper advertisement about such option having been given
c. Amend the Risk Factors as given in the LETTER OF OFFER Dated: December 18, 2006 to include and inform the shareholders of the financial loss to them in view of the offer price of Rs.58 being lower than the market price of Rs.62. In case the Acquirers win in their appeal in the matter of Non-Compete fees, there would be an immediate loss of Rs.4 per share to the share holders . Even if the Acquirers lose, the actual gain to the shareholders will not be Rs. 14.50 per share but Rs.14.50 less the differential between the offer price and Market i.e. Rs.14.50 less Rs. 4 as per the current market situation. In the absence of such information the shareholders may make an error in their judgment and tender their share in the open offer to the undue advantage of the Acquirers.
d. Extend the time of closing of the offer by about a week in order to allow sometime to the shareholders to take a well considered decision in view of the new option that has come
e. Alternatively the Acquirers be directed to give an undertaking that in case the Acquirer's challenge to the SEBI direction be unsuccessful, they will offer to buy shares @ Rs.72.50 from all the shareholders who are holding the shares as on the date of closure of the offer, regardless of the fact whether they have tendered their holdings in the offer or not.
f. In case the Hon’ble SAT does not find any of the above acceptable, as a last resort directions may be given to The Respondents to deposit into investor protection/ education fund the amount of Rs.14.50 per share saved on the number of shares, i.e. 3.5 crs. Shares less the no. of shares on which this amount has actually been paid, multiplied by Rs.14.50.
I am aggrieved by the way the order of Hon’ble SAT is sought to be implemented. A letter dated 22nd December was written to The Chairman, SEBI urging him to effectively implement effectively implement the order or else the whole thing will become a farce.
I had written a letter no. Dated 22nd December 2006 to SEBI to that suitable ways must be found to effectively implement the order otherwise the whole thing will become a farce. All the shareholders must be given an option to accept the offer
i. @ Rs.58 or higher i.e. at the present rate and condition or
ii. Only @ Rs. 72.50 i.e. only if the Non-compete fee of Rs.14.50 is also paid/payable.
The Hon’ble SAT order will be infructuous unless the above suggestions or other such measures are taken to effectively implement the same. The Respondents are simply pretending to implement without really intending to do so. The Respondents did not honestly want to implement the order of the Hon’ble SAT is evident from the fact that no action has been taken on such a suggestion. Since the offer price is less than the market price shareholders will not tender their shares in the open offer and as a result will not be entitled to get the additional Rs.14.50 and otherwise the shareholders will lose Rs.4 per share by tendering the shares at a rate lower than the market rate.
This will result in a great loss to the common share holders and undue enrichment to the Acquirers who are large Foreign bodies corporate. It is only a ‘win-win’ situation for them, and ‘lose-lose’ situation for the general investors. In case the shares are tendered now and even if the Acquirer's challenge to the SEBI direction be unsuccessful, the shareholders will not receive the full Rs.14.50 because they would have already lost Rs.4 per share being the differential between the offer price of Rs.58 & Market price of Rs.62. In case the Acquirers win, then also the investors who tendered the shares in the open offer would lose @ Rs. 4 per share. Their share would have been acquired by the acquirers at Rs.4 lower than the market price.
The above typical situation has arisen because of the Respondents’ evil design to take maximum advantage from every situation at the cost of fair play and justice and loss to others. They have not placed full facts in front of the hon’ble SAT while seeking relief.
The Respondents on the other hand will always gain Rs.4 per share having bought the share @ 58 which otherwise would have cost them Rs.62 in the market. The Respondents has already displayed their desire to hike their stake/ shareholding in the target company by coming up with an Open offer for a higher % age than the mandated 20% as per the law.
Such a loss to the shareholders in the hands of foreign bodies corporate is also a National loss since the additional cash flow that would have come into the country will not come because of the above evil design of the Acquirers.
Relieves sought
The Open Offer in its current form is a fraud on The Hon’ble SAT and the shareholders/investors at large.
a. The Acquirers must be directed to immediately give an option in the Letter of Offer and ‘Form of acceptance –cum-acknowledgement’ allowing the shareholders to accepted the offer
i. @ Rs.58 or higher i.e. at the present rate and condition or
ii. Only @ Rs. 72.50 i.e. only if the Non-compete fee of Rs.14.50 is also paid/payable.
b. Inform all the shareholders by means of News paper advertisement about such option having been given
c. Amend the Risk Factors as given in the LETTER OF OFFER Dated: December 18, 2006 to include and inform the shareholders of the financial loss to them in view of the offer price of Rs.58 being lower than the market price of Rs.62. In case the Acquirers win in their appeal in the matter of Non-Compete fees, there would be an immediate loss of Rs.4 per share to the share holders . Even if the Acquirers lose, the actual gain to the shareholders will not be Rs. 14.50 per share but Rs.14.50 less the differential between the offer price and Market i.e. Rs.14.50 less Rs. 4 as per the current market situation. In the absence of such information the shareholders may make an error in their judgment and tender their share in the open offer to the undue advantage of the Acquirers.
d. Extend the time of closing of the offer by about a week in order to allow sometime to the shareholders to take a well considered decision in view of the new option that has come
e. Alternatively the Acquirers be directed to give an undertaking that in case the Acquirer's challenge to the SEBI direction be unsuccessful, they will offer to buy shares @ Rs.72.50 from all the shareholders who are holding the shares as on the date of closure of the offer, regardless of the fact whether they have tendered their holdings in the offer or not.
f. In case the Hon’ble SAT does not find any of the above acceptable, as a last resort directions may be given to The Respondents to deposit into investor protection/ education fund the amount of Rs.14.50 per share saved on the number of shares, i.e. 3.5 crs. Shares less the no. of shares on which this amount has actually been paid, multiplied by Rs.14.50.
Subscribe to:
Posts (Atom)
