New Delhi When India's richest man Gautam Adani this week unveiled plans for his firm to control a majority stake in New Delhi Television (NDTV), it was the stealth approach in executing the transaction that drew most attention in the news industry.
But NDTV, one of nation's most popular news networks, is seeking to block the takeover attempt by the billionaire tycoon's group, saying regulatory restrictions prevent the bid from proceeding.
NDTV is regarded by some as one of the few independent voices in India's rapidly polarising media landscape, and the takeover attempt has triggered concerns among journalists and politicians that a change of ownership could undermine its editorial integrity.
This is how the firm controlled by the Adani family went about planning the takeover and how NDTV is trying to resist it.
A company called VPCL
Much of the spotlight on Adani's two-stage takeover bid is on one, little-known Indian company: Vishvapradhan Commercial Private Limited (VCPL), founded in 2008.
More than a decade ago, NDTV founders Prannoy and Radhika Roytook 4 billion rupees ($50 million) in loans from VCPL, and in exchange issued warrants that allowed the company to acquire a 29.18 per cent stake in the news group.
Those warrants were convertible at any time. Adani Group said on August 23 it had acquired VCPL and exercised those rights, which should give it the stake in NDTV.
Adani Group's takeover bid is without NDTV's consent, the news organisation said hours later. Internally, an NDTV memo referred to the move as "entirely unexpected."
An open offer letter plan
Adani Group's indirect control of a stake above 25 per cent means it must put forward an open offer to purchase at least 26 per cent more from existing shareholders in NDTV to give them an opportunity to exit, according to Indian regulations.
That's what Adani did. Laying out its plan, the Adani Group said the open offer will be at 294 rupees per NDTV share for a total consideration of up to $62 million.
If the two-stage plan works, Adani Group would get 55.18 per cent of the popular news network.
NDTV pushes back
Although NDTV has said Adani's move was without its consent, four lawyers who spoke to Reuters said Adani Group was well within its legal rights in the deal process so far.
Also read:Adani will need SEBI approval to acquire stake: NDTV
NDTV had said it was given two days to transfer the shares due to the Adani Group after it made the takeover bid.
But as that deadline neared, NDTV has threw a spanner in the works by disclosing on August 25 that its founders were currently prohibited from dealing in India's securities market.
That was due to a 2020 regulatory decision in a case of suspected insider trading of NDTV shares, the news network said, meaning it can't transfer shares Adani was trying to secure.
The regulatory restriction is in place until November this year, and a lawyer said NDTV's effort at best can "stall or slow down the process" of Adani's takeover.
Other lawyers have said NDTV should have foreseen the situation as its founders had issued warrants to VCPL years ago and there was always a possibility a company could execute them to acquire a stake.
One option would be for the NDTV founders to make their own open offer at a higher price to try to increase their stake and challenge Adani, said Shriram Subramanian, founder of proxy advisory firm InGovern.