Race heats up for MCF control after Deepak Fert raises offer

Saroj Poddar, the Chairman of Adventz Group, made the first move for acquisition of Vijay Mallya’s UB group-controlled Mangalore Chemicals and Fertiliser (MCF).

In April 2013, his Zuari Fertilisers and Chemicals picked up 10 per cent stake from SBI Capital at ₹38 a share. The deal, sources say, was clinched under the very nose of Sailesh Mehta’s Deepak Fertilisers and Petrochemicals that was also preparing for market acquisition.

Barely three months down the line in June 2013, Mehta stormed the scene with over 24 per cent stake in MCF, triggering some counter buying by Poddar, who always claimed that he was in the best of the terms with Mallya and was interested in friendly acquisition.

Till about a month ago, Poddar was confident in reaching his goal. Having kept both sides on the tenterhooks for some time, Mallya finally invited Zuari to play a White Knight to help him retain control over MCF (with only 22 per cent stake) in the face of Deepak’s hostile offer.

But, the dice have rolled on Friday with Deepak offering to pay ₹12 a share more than Zuari, in the final round of open offer. Deepak could have preferred to go inch by inch. But it went for the kill, offering to pay a mind blowing ₹93 a share, that is much higher than the market ever expected.

The reason behind such aggression is Deepak’s long-term interest in MCF. What is more, it will offer Deepak an entry in the South Indian market. Also MCF has excess land, which can be used for expansion of the facility. Deepak’s Pune facility does not enjoy this advantage.

Though a naphtha-based facility, MCF has already invested in plant and machinery to switch over to natural gas. It is uncertain if the company will access natural gas supplies. But it can surely access the re-gasified LNG supplies from Petronet’s Kochi terminal once the pipeline network is complete.

Deepak saw more value in acquisition than going for greenfield route. Did Poddar get a cold feet? Zuari already produces urea and complex fertilisers in Goa. It was all across keen to acquire MCF to expand the geographical coverage to South. Poddar is a seasoned acquisition artist and he is definitely not running short of cash either.

But if the open offer be of any indication, he didn’t see as much value in MCF. Unless of course, he was constrained by the ‘wilful defaulter’ notice served on Mallya by a banker, for failing to repay loans offered to UB promoted Kingfisher Airlines.

That surely raised a lot of questions on the legal validity of the agreement between the two. Talking to media earlier this month Poddar, downplayed the issue but pointed out that term sheet of the contract may be amended in view of the developments.

Zuari’s final offer at ₹81.60 a share did not mention about any amendment in the contract.

The big question is: Did Poddar get a cold feet or, does he have more cards up his sleeve?