Mallya's Mangalore Chemicals set for takeover battle - Livemint

Deepak Fertilisers said in a regulatory filing that a wholly-owned subsidiary, SCM Soilfert Ltd, had on Tuesday placed an order with JM Financial Services Ltd to buy up to two million shares of Mangalore Chemicals.

Mumbai/Kolkata: The stage seems to be set for an intense takeover battle between Deepak Fertilisers and Petrochemicals Corp. Ltd and Zuari Fertilisers and Chemicals Ltd for Mangalore Chemicals and Fertilizers Ltd.

On Tuesday, capping months of negotiations over a potential stake sale, Deepak Fertilisers sprang a surprise on liquor baron Vijay Mallya with an unsolicited bid to acquire a 26% stake in Mangalore Chemicals and Fertilizers, controlled by his group, through an open offer for Rs.190 crore.

Mallya, whose UB Group holds a 22% stake in Mangalore Chemicals, could lose management control if the Pune-based firm's offer is fully subscribed to by minority shareholders. The target company, which produces farm inputs and posted Rs.2,790 crore in revenue in fiscal 2013, is valued at Rs.782 crore at its current market price.

A full-blown takeover battle could ensue, as another suitor for the company, Kolkata-based industrialist Saroj Poddar, could make a counterbid, according to people familiar with his plans. Poddar, who also owns a substantial stake in Mangalore Chemicals, is expected to firm up his plans over the next few days in consultation with Mallya.

Shortly after the markets opened, Deepak Fertilisers said in a regulatory filing that a wholly-owned subsidiary, SCM Soilfert Ltd, had on Tuesday placed an order with JM Financial Services Ltd, a broking firm, to buy up to two million shares of Mangalore Chemicals for a maximum price of Rs.63 each.

On assumption that these shares would be secured, which would increase its stake in Mangalore Chemicals to 26.1%, Deepak Fertilisers further announced that it was making an open offer to acquire through its subsidiary 26% more in the company in compliance with Indian takeover laws.

Deepak Fertilisers has initially priced its open offer for 30.8 million shares at Rs.61.75 apiece, but it may have to raise it depending on the price it pays for the proposed purchase of two million shares. The firm, valued at Rs.1,103 crore at its current market price, has held 24.5% in Mangalore Chemicals since last July.

Shares of both Mangalore Chemicals and Deepak Fertilisers jumped on Tuesday on the back of heavy buying. In a flat market, Mangalore Chemicals' shares rose 6.6% to close at Rs.66.05, while those of Deepak Fertilisers moved up 4% to Rs.125.15 on the BSE. The benchmark Sensex gained 0.5% to close at 22,876.54 points.

"We will study the offer, review our options and respond accordingly," said a spokesperson for the UB Group.

Kolkata-based Poddar was also taken by surprise by Tuesday's development, but he is happy that the stalemate is now going to end, said a person close to him. A little over a year ago, Poddar started acquiring shares of Mangalore Chemicals and currently owns 16.43% of the firm's shares through Zuari Fertilizers.

In an interview a year ago, Poddar had said he wanted to take over Mangalore Chemicals but wouldn't launch a hostile bid to wrest control of the company from his "friend" Mallya.

The UB Group chairman, too, had at that time, welcomed Poddar as an investor in Mangalore Chemicals, fuelling speculation that he had been brought in as a white knight to stave off potential takeover bids.

In the past year, Mallya has pared his holding in almost all UB Group companies and isn't the single largest shareholder in any except UB Engineering Ltd.

For almost a year, Poddar, too, tried to engage Mallya in discussions over a change in control but no deal materialized. Poddar, however, still remains interested in Mangalore Chemicals and would consider making a counterbid if Mallya backs him, according to people familiar with his plans. Though he can make a sizeable profit, he is not looking to sell out to Deepak Fertilisers, these people said, asking not to be named.

"We made the open offer for compliance with takeover regulations, but the situation remains the same as previously: we are open to discussions with both Dr Mallya and Mr Poddar," said Somnath Patil, president and chief financial officer of Deepak Fertilisers.

Neither Mallya nor Poddar showed any interest in buying the shares that Deepak Fertilisers had cornered, said an equity analyst with a domestic brokerage, requesting anonymity for himself and his firm.

Having already taken the plunge, "Deepak Fertilisers has no option but to go for (an) open offer", he added.

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