Two failed attempts. The first was in July 2004, when Swedish pharmaceutical major AstraZeneca Pharmaceuticals AB attempted to delist saying its holding in the Indian subsidiary has gone above 90 per cent.
Backtracks after price findFollowing the guidelines laid down by the Securities and Exchanges Board of India, AstraZeneca Pharma India Ltd had fixed the floor price at ₹825, which was much higher than the ₹375 a share it had paid to mop up shares through open offers.
But when AstraZeneca discovered through the reverse book-building process the price of ₹3,000 apiece, it turned away from the delisting proposal.
It returned with another offer to get off the exchanges in 2010, about a month after the market regulator said listed firms should have at least 25 per cent stake in public hands. However, shareholders disapproved the proposal.
The company, which diluted its stake mainly to foreign institutional investors in last May to meet the SEBI norm, is making another attempt, which the board on Saturday approved.
This time, however, the chances of success look brighter, says N Arunagiri, Founder and Chief Executive Officer, Trustline Holdings Pvt Ltd, a Chennai-based equity research company.
“For any brand-driven multi-national pharmaceutical company, the premium to the ruling market price for buyback is significantly high. Take the case of GSK Pharmaceuticals’ recent voluntary open offer. The valuation exceeded 40 times the earnings.”
Another reason for the possible success could be high foreign institutional holding, feel analysts.
Foreign institutional investors, holding 15.93 per cent in the company now, may be willing to sell at a 30-40 per cent upside from the rate they bought last year — ₹620 a share, says Arunagiri. “This will easily take the promoter stake up to 90 per cent, which is the bar for any delisting to be termed a success.”
Shareholders unwilling to give away their shares may sell it to the promoter during the one-year “tail period” after delisting, during which the promoter is obliged to buy at the reverse book-building price.
According to Yogesh Chande, consultant with law firm Economic Laws Practice: “It is a win-win for the promoter and the shareholder this time. Prices have started going up now.” A small shareholder can get a sense of the likely exit price by following the bidding of large investors on the web, he added.
“The process, which is expected to take some months, requires an initial AZPIL public shareholder approval to proceed with the offer process. In the event AZPIL public shareholder approval is given, AstraZeneca will evaluate the tender offers by reference to a rigorous assessment of the potential to enhance shareholder value to the wider group,” Esra Erkal-Paler, Head of Global Media Relations at the promoter company, wrote in a mail to Business Line .
Sarabjit Kaur Nangra, Vice-President, Angel Broking, says actions such as delisting are bound to have a sharp effect on the market. The scrip on the BSE shuttled to the upper circuit at ₹1,190. 90 on March 3, the day the board put out the delisting word. After the board deferred it on March 5, asking for more information from the promoter, the stock dipped for two consecutive sessions.