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Bright Star takes a U-turn, welcomes BAT bid

BS Bureaus

In an interesting turn of events, Bright Star Investments on Wednesday came out in support of British American Tobacco (BAT) which has expressed its desire to up its stake in VST Industries from the existing 32.17 per cent.

"Bright Star has a high regard for BAT and we would welcome a bigger role for it in VST's management," said John Band, CEO of ASK Raymond James, the merchant bank managing the Bright Star open offer for VST.

On Tuesday, Band had told Business Standard that BAT's proposal to raise its stake was a tactical ploy to confuse VST shareholders into not subscribing to the Bright Star open offer.

Though Band refused to disclose how many VST shareholders subscribed to the Bright Star open offer, it had acquired a 16 per cent stake in VST which triggered the open offer. If it throws its weight behind BAT, the combined holding of the two in VST would be at least 48.17 per cent.

Meanwhile, Russell Credit's counter offer for 20 per cent in VST closed on Wednesday with a total collection of about 9 per cent. In addition, the ITC investment subsidiary had picked up about one per cent equity through market purchases.

Thus, the total holding of Russell Credit would be marginally lower than 10 per cent. The company's open offer having hit the market ahead of Bright Star's, it got a headstart over its contender. But since Bright Star's revision of its offer price to Rs 151 10 days ago, subscription to the ITC investment wing's offer had been overshadowed.

In another development, the Andhra Pradesh High Court on Wednesday adjourned the VST open offer stay case to Monday for further hearing, taking assurance from Bright Star that it will extend the period of the open offer by five days after the court's final order.

All eyes are now set VST board meeting on Thursday where the BAT proposal will be taken up for consideration. The financial institutions, who collectively hold an 18 per cent stake in VST, on Wednesday indicated that they will wait and watch, rather than subscribe to either of the two offers. Top institution sources said that the reason for turning down Russell Credit's offer was that it was "purely unattractive".

The reason for shunning the Brigh Star offer was that they viewed the Damanis as mere investors, and there were "no guarantees that they would stick with VST". They are expected to meet next week to take a view on the matter.

The Andhra Pradesh government, which holds, a 4-5 per cent stake, is likely to toe the institutions' line. According to sources, the state government has stayed away from both the offers and is unwilling to disturb the current management.

RELATED STORY:
VST stake: BAT must get ITC OK, says govt

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