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June 30, 2001
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Money > Business Headlines > Report June 30, 2001 |
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Depressed markets may see a flurry of open offers from MNCsRakesh P Sharma The next few months will witness more open offers by multinational companies operating in the country, as the markets remain depressed. "Current market conditions have given MNCs the right opportunity to go for open offers. As the markets are at a low as compared to last year, the price offered by the MNCs to shareholders - which is usually at a premium to the ruling market price - makes a good value proposition for the MNCs now," Ravi Kapoor, senior vice-president, Investment Banking, DSP Merrill Lynch, said. "MNCs are also looking at open offers from the strategic point of view as they want to have a greater control and achieve consolidation in the different markets that they operate in," Kapoor added. DSP Merrill Lynch has managed the largest number of open offers in 2000-01, with 6 deals amounting to Rs 5.33 billion. Out of this, 3 were from MNCs going in for open offers amounting to Rs 2.81 billion. Some of the recent open offers by MNCs managed by DSP Merrill Lynch are that of Royal Philips Electronics NV for the shareholders of Punjab Anand Lamp Industries and United Technologies Corporation for Otis Elevators Co. Liberalisation in foreign investment policies and the change in mindset of the institutional investors have lead to the growing trend of MNCs going for open offers, according to analysts. Open offers provide liquidity and exit route to most of the investors and the country in turn gets foreign direct investment. Sometimes, overseas acquisition by the parent company triggers off open offer to the domestic shareholders, as per the regulations in the country. One recent example is the open offer here resulting from Unilever's buyout of Best Foods, USA. On other hand, buy-back is a different story altogether. It is not to be seen as a tool to increase promoters' shareholding. As a result of buy-back, not only the promoters, but all the residual shareholders get a chance to consolidate their shareholdings. The key driver for buy-back is surplus cash available with the company, which can be returned to the shareholders. "Buy-back is done when the management needs to give a signal to the market that the stock is undervalued," added other merchant bankers. Powered by YOU MAY ALSO WANT TO READ:
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