MCF offer: Deepak Fert adds just 7% stake

The open offers from rival companies — Deepak Fertilisers and Petrochemicals and Zuari Fertilisers and Chemicals — for Vijay Mallya’s UB Group-run Mangalore Chemicals and Fertilisers (MCF) ended on Monday.

Market sources say Deepak Fertilisers and Petrochemicals could mop up a mere 6-7 per cent stake (over and above the prevailing 25.3 per cent) at an offer price of ₹93.60 a share. Deepak’s stake in MCF post-open offer stands at 31-32 per cent as against the targeted 51 per cent.

The offer, announced on September 26, was ₹20 higher than the prevailing price of MCF and nearly 15 per cent higher (₹12 a share) than the best offer from rival Zuari Fertilisers and Chemicals, which is acting in concert with the UB Group.

Together, Zuari and UB control 38.4 per cent in MCF (as against 31-32 per cent of Deepak).

In others words, Mallya retains control over MCF. But, to his worry, Deepak is now in a position to claim board representation and even stall special resolutions.

According to SEBI regulations, neither party can come out with an open offer for the next one year. They can opt for 5 per cent creeping acquisition a year. But if they acquire such shares at a price higher than the respective open offer, they have to pay the differential to the subscribers of the open offer.

Interestingly, a minuscule percentage of shareholders reportedly subscribed to Zuari’s offer sacrificing higher profit opportunities.

The primary reason behind the failure of Deepak’s offer is the sudden buying interest in the market (from September 26) that kept the stock consistently above the open offer price all through. The stock ended at ₹95.75 a share on Monday.

Taking advantage of the higher stock price, a large number of small investors divested their holding in MCF through market deals rather than by participating in the open offer.

Available information suggests in the last five days alone nearly 86 lakh shares were traded in both the exchanges (which is probably a few times the normal monthly average traded on the MCF counter). Of this, 75 lakh (nearly 6.33 per cent of the share capital) were delivered.

That the buying interest was timed with the open offer is clear from the free fall of MCF shares by 7.89 per cent on Tuesday. Stock analysts predict it further fall.