"Dubai co likely to acquire 15% stake in GHCL "

DUBAI-BASED Al Rostamani group is expected to buy 15% stake from the promoters of GHCL as a part of a larger transaction which could result in the Middle East group owning a little more than one third of the flagship company of the Sanjay Dalmia group. The deal, including the mandatory open offer will be triggered as part of the transaction, which is expected to cost anywhere between Rs 550-690 crore.

According to sources, the deal would involve stake sale by the promoters of GHCL which would bring down their direct holding in the firm to around 32%. If the open offer is fully subscribed then Al Rostamani group will own close to 35% in GHCL. However, besides direct holding there are other shareholders associated with the company including an employees trust which if added will allow GHCL promoters to remain the largest shareholder.

A GHCL spokesperson declined to comment on the developments. However, in response to an ET report on June 11 about Al Rostamani group picking up a substantial stake in GHCL, the company had informed the stock exchange: “The company is an expanding organisation and exploring growth opportunities organically and in-organically both. As a sequel to this effort, we keep examining various proposals for funding requirement. Any specific proposal till it is finalised cannot be commented upon.”

According to sources, the promoters are negotiating for a deal value which could be close to the FCCB issue made in September 2005. The price for the FCCB issue was fixed at Rs 197 per share in 2006. If the deal is struck at this price Al Rostamani will have to fork out around Rs 690 crore to get 35% stake in GHCL. The final transaction, could be struck at a price range of Rs 160-200 per share or even lower.

Even at this price range the deal would be at a substantial premium to the current price of GHCL which is hovering around Rs 72, after jumping 50% over the last one week. Insiders say, the promoters are in no mood to cede control of the company and the move is part of a fund raising exercise for other expansion plans which could involve bigger acquisitions.

"Daiichi to increase Ranbaxy stake by 20%"

Japanese Co To Make Open Offer On Aug 8; Pfizer Rumoured To Be Making Counter-Offer For 65% Non-Promoter Stake

JAPANESE company Daiichi Sankyo on Monday announced that it will make an open offer to buy 20% stake (92 million shares) in Ranbaxy Laboratories. The offer opens on August 8 and will close on August 27. The last day for submitting a competing bid is July 7. There is unconfirmed speculation that US major Pfizer is exploring the possibility of making a counter-offer to buy the 65% non-promoter stake in the company.

Last week, the promoters of Ranbaxy Laboratories announced that they have agreed to sell their entire 34.82% or 129.9 million shares in Ranbaxy for Rs 737 per share or around Rs 10,000 crore to Daiichi.

Daiichi will pick up 9.5% in the company through a preferential allotment of shares up to 9.5% and will have the option of acquiring another 4.9% through the issue of warrants. If the open offer is fully subscribed then on a fully diluted basis, Daiichi will own 58% of the company. An EGM of the company has been called on July 15 to approve the preferential issue of shares and warrants. According to the Indian laws, the Japanese company will have to make an open offer of another 20% stake at a price not less than Rs 737. However, all minority shareholders may not be able to sell all their shares. If the number of minority shareholders who want to subscribe to the open offer cross 20%, then Daiichi Sankyo will buy their stake proportionately to their shareholding in the company’s remaining 65% stake.

Ranbaxy promoters have entered into a non-compete clause with Daiichi for which they will not receive any additional compensation. After the completion of the transaction ,the Ranbaxy board will be reconstituted. It will comprise of four nominees from the Singh family and six from Daiichi. The two sides will select their independent directors, putting a question mark on the independence of these independent directors. Daiichi Sankyo has appointed ICICI Securities as the manager of the offer.

"Counterbid stumps Sterlite"

OUT OF THE BLUE: Grupo Mexico Makes $4.1-Bn Offer For US Co Asarco

TAKEOVER tussles appear to be the flavour of the season. After Essar found itself competing with a Russian firm for an overseas acquisition, it is the turn of Sterlite Industries to discover a rival bidder suddenly stepping out of the woodworks and challenging its takeover of Asarco — a $2.6-billion transaction that seemed a done deal.

On May 31, Sterlite announced the acquisition of Asarco, a US-based copper mining firm, in a cash deal after negotiating for several months. Much to it’s surprise, a few days ago, Grupo Mexico, the erstwhile promoter of Asarco, made an offer of $4.1 billion to regain control of the Tucson-based copper miner. Sources told ET that Grupo Mexico has submitted a proposal in the bankruptcy court in Corpus Christi in Texas to pay $ 4.1-billion to acquire Asarco. Significantly, the proposal has not been rejected.

In fact, the Asarco board would meet shortly to evaluate the offer, they said. On the face of it, Grupo Mexico’s $4.1-billion bid may seem to be far in excess of Sterlite’s $2.6 billion. But the offers from Sterlite and Grupo Mexico are not strictly comparable as the former does not include Asarco’s legacy liabilities, while the latter’s $4.1-billion bid does. But even after factoring these in, Grupo Mexico’s offer is higher than that of Sterlite’s. This transaction is a little more complicated than other M&A deals, since the transaction, done through an auction conducted by the Asarco board, was overseen by the bankruptcy court.

Grupo Mexico has also demanded that the break-up fee should not be paid to Sterlite, in case the deal fails through. The US government’s environmental protection agency, however, criticised the Grupo Mexico proposal, saying it would send wrong signals to investors.

The proceeds would help Asarco clean up its environmental mess and help protect its stakeholders from prolonged financial risks amid volatile copper prices.

GRUPO MEXICO
Mexico’s
largest mining corporation and the world’s third largest copper producer. It lost board control over Asarco when the latter filed for bankruptcy in 2005

$1.73b SALES
$452m NET PROFIT
$1.02b EBITDA
59% EBITDA MARGIN STERLITE

A leading
producer of copper in India. It is a part of Vedanta Resources, a London-listed metals and mining major with aluminum, copper & zinc operations in India

7332 SALES 1
932 NET PROFIT
367 PROFIT FROM COPPER
3535 REVENUE FROM COPPER Asarco bondholders oppose Sterlite

THE possibility of a re-bidding at this stage will depend on the bankruptcy court and the Asarco board. Grupo Mexico lost board control over Asarco when the latter filed for bankruptcy in 2005. It has submitted various proposals in the past three years, but this is for the first time it is coming out with a definitive financial plan to regain Asarco. “But now, it is announcing a new offer after the closure of the deal. One should keep in mind that Sterlite emerged as the highest bidder through a prolonged auction process,” said an industry expert.

Interestingly, Grupo Mexico is not the only party that’s opposing Sterlite. Two of the largest bondholders of Asarco — namely Harbinger Capital Partners Master Fund 1 and Harbinger Capital Partners Special Situations Fund LP — have urged the bankruptcy court in Texas to block the Sterlite deal. These funds said in a court document that Sterlite’s plan to finance the Asarco deal is “questionable” as it aims to raise most of the required fund from public market. Sterlite plans to create a subsidiary — Sterlite (USA) — which is expected to raise $780 million-$1.3 billion for the purchase. The funds said Asarco “ran an unfair auction and selected an illusory winner.” Asarco, formerly known as American Smelting and Refining Company, was put on the block after its creditors and trade unions filed for bankruptcy nearly a year ago.

Lehman Brothers acted as financial advisor and Baker Botts acted as legal advisor to Asarco in the auction conducted by the bankruptcy court. It is the third-largest copper producer in the US. Its bankruptcy in 2005 was caused by environmental liabilities.

Even as Sterlite tries to fend off its rival, another Indian group, Essar is in the midst of a full blown bidding war with the Russian mining firm Severstal for acquiring the US steel maker Esmark. Sections feel Essar is in an advantageous situation as the Esmark board rejected the Severstal offer. But, chances are the Russian company will return with a higher bid. Severstal is being supported by Esmark’s trade union and its largest shareholder. On the other hand, the Esmark board approved the Essar bid and also took a short term loan of $110 million from Essar.