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Sterlite ups the ante in bid to take over Indal

Against its earlier offer to acquire only a 20 per cent stake, it has now proposed to acquire a majority stake of 52.03 per cent at a price of Rs 221 per share, payable in cash Rs 131 and Rs 90 by way of optionally convertible preference shares.

Alcan of Canada had also made an offer earlier in the day of Rs 175 per share to hike its stake in the company from the present 34 per cent to 54 per cent. Alcan has not yet made any counter offer to Sterlite's seducing bid of Rs 221.

This price is substantially higher than its offer price of Rs 115 made in March, and the counter offer of Rs 120 by Alcan made in April. Then, however, Sterlite was bidding only for a 20 per cent stake in Indal.

Sterlite has now offered a cash price of Rs 131, plus Rs 90 in the form of nine OCPS of Rs 10 each. Sterlite has made the OCPS very attractive for Indal shareholders by offering a market friendly dividend rate of 11 per cent per annum. It has also offered an option to the Indal shareholders to convert the preference shares into equity shares of Sterlite at the end of 18 months from the date of allotment.

The conversion price is at a discount of 10 per cent to the average of the high and low price of Sterlite shares on the Bombay Stock Exchange during 10 weeks preceding the conversion date and subject to a minimum price of Rs 350 per share. The recent price of Sterlite has been in the range of Rs 310 to Rs 330.

OCPS, which are not offered for conversion, would be redeemable in cash in two equal instalments at the end of 3rd and 4th year. The dividend of 11 per cent per annum would be payable pro-rata till conversion/redemption.

At the revised offer price, the aggregate consideration for 52 per cent stake in Indal would be around Rs 8.18 billion. The same has been funded by the securatisation and receipt of deferred payment receivables from DoT of Rs 3.7 billion, other internal accruals and borrowings, besides the above preference share issue of Rs 3.33 billion.

Sterlite has increased the offer price keeping in mind the higher stake that it is seeking to acquire now. This price is payable even to those shareholders who have already tendered Indal shares to Sterlite earlier. Also, Indal shareholders can have a greater part of their holding accepted under the open offer since the offer size has now been increased from 20 per cent to 52 per cent of the equity capital of Indal.

Indal was known to prefer Alcan picking up a majority stake in the company. This may not happen now.

Financial institutions have about a week's time to decide. But they are unlikely to wait much longer. The Unit Trust of India was waiting for the revised offers as it had purchased its Indal stake at Rs 115 per share, and is likely to act soon.

Alcan plans to challenge Sterlite's bid on the ground that the latter's offer is not a revision as permitted under the Takeover Code. Alcan might take the case to SEBI or the courts.