The race for UB Group-controlled Mangalore Chemicals and Fertiliser Ltd (MCF) is likely to get hotter in next couple of days with looming possibility of an open offer playing a decider.

This is to ensure a ‘friendly solution’ to the take over tussle between Zuari Fertilisers and Chemicals and Deepak Fertilisers and Petrochemicals.

According to sources, with Saroj Poddar-controlled Zuari continued acquiring shares of MCF till Friday stepping up its stake to 16.43 per cent against 24.46 per cent of Deepak and, UB remaining non-committal to negotiations from either side, the game is fast entering the final stage.

Vijay Mallya’s UB controls 20.99 per cent stake in MCF with about 11 per cent pledged with the lenders.

“With two companies in the race for MCF, UB group may be playing a wait-and-watch game,” a source with first hand knowledge on the take-over tussle told Business Line.

Insiders in MCF say that even though Mallya is playing a ‘wait-and-watch’ game, the threat of Sailesh Mehta-run Deepak Fertiliser opting for an open offer looms large. Hence, he may have to settle for a “friendly takeover” option sooner than later.

Mallya’s concerns lie in the fact that the warring camps of Poddar and Mehta have already cornered 41 per cent shareholding in the company against nearly 21 per cent of UB.

And, that opens the possibility of a share purchase deal between the two rivals (Deepak and Zuari), making it imperative for Mallya to handover the baton, a merchant banking source points out.

Narrowing opportunities

Meanwhile, the race for acquisition of MCF coupled with sustained open market buying by Zuari has sent MCF stock through the roof. From Rs 27 in March (a month before the acquisition battle began) the company’s shares closed at a new high of over Rs 70 on Friday.

This is having a negative impact on Zuari which started off the campaign by acquiring the initial 10 per cent stake (including the 8.44 per cent stake of SBICAP Securities) in early April, at a mere Rs 38/ share.

Though Zuari still enjoys approximately Rs 10 cost advantage over Deepak (acquired over 24 per cent stake in July at Rs 61.75 ), further open market buying will be a drain on Zuari’s resources and eliminate its share purchase cost advantage (over Deepak).

Time is also running out for Deepak that had hit the threshold market acquisition levels of 24.46 per cent on July 3 and should resort to open offer for next 26 per cent acquisition. With 38 per cent stock still left with public (as on July 12), the company will soon have to take a call on the future of the acquisition campaign.

open offer

Though sources in any of the camps did not rule out possibilities of settling the issues through early negotiation, the indications are strong that every side (including Mallya) are trying to strike the best deal.

That opens the looming possibility of forcing the aspiring acquirer (of MCF) to commit the highest prices through open offer, thereby opening gates of block deals. Both the companies reportedly took stock of the legal issues concerning open offer end of the last week.

The rule suggests whom so ever moves first should keep the offer open for nearly three to four months. The offer can be rivalled by any other aspirant within 15 days of opening. The first mover will get the opportunity to improve its offer three days before the closure.

While none of the camps are ready to share their game plan. Market sources expect Deepak Fertiliser to make the first move, if the negotiation fails to reach a conclusive stage, this week.

>pratim.bose@thehindu.co.in

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