The Securities and Exchange Board of India has decided to ask German cement major Heidelberg to increase the price of its open offer for the shareholders of Mysore Cements by 25 per cent to Rs 72.50 a share.
The open offer was triggered after Heidelberg acquired a majority stake in Mysore Cements from its promoters, the S K Birla group. Priced at Rs 58 a share, the public offer was supposed to open on September 6 and close on September 25.
Sources close to the development said Heidelberg will be asked to pay minority shareholders the same price it had agreed to pay the promoters.
The deal allowed the promoters to get Rs 72.50 a share, which was 25 per cent higher than the price of the open offer on account of non-compete fees, an arrangement in which Sebi did not find merit.
It is not known when Heidelberg will come out with a revised open offer. The Mysore Cements stock on Monday closed at Rs 65.95 on the BSE, 0.30 per cent higher than the previous close of Rs 65.75. In intra-day trade,
it touched Rs 68, slightly lower than the 52-week high of Rs 68.15 recorded on November 30.
In a uniquely structured deal, Mysore Cements had announced on July 9 that it would allot up to 66.5 million equity shares, representing a 42.08 per cent stake, to Heidelberg on a preferential basis at Rs 54 apiece.
Also, Heidelberg would buy 13.40 million shares, amounting to a 8.48 per cent stake, from the promoter group for Rs 58 per share, excluding non-compete fees of Rs 14.50 per share.
Payment of non-compete fees is not uncommon in mergers and acquisitions in India. Earlier this year, Holcim paid Rs 90.64 per share in an open offer to the shareholders of Gujarat Ambuja Cements, while it paid Gujarat Ambuja's promoters Rs 105 per share, with the extra Rs 14.36 per share being labelled as non-compete fees.
Heidelberg took management control of Mysore Cements by subscribing to the preferential offer and placed its representatives on the company's board.
Mysore Cements mobilised Rs 359 crore (Rs 3.59 billion) by allotting preferential shares. Of this, the company used Rs 272.23 crore (Rs 2.72 billion) for paying back financial institutions and taking care of other expenses.
The remaining sum has been kept as a fixed deposit with Standard Chartered Bank. Mysore has paid to institutions such as ICICI Bank {Rs 65.77 crore (RS 657.7 million)}, IDBI {Rs 41.70 crore (RS 417 million)}, IFCI {Rs 145 crore (Rs 1.45 billion)} and Federal Bank {Rs 2.14 crore (Rs 21.4 million)}.
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