TAKE-OVER OF MOUNT EVEREST MINERAL WATER BY TATA TEA

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