Get benefited by competitive Bidding

Reliance offered to buy 21.6 million shares, or 62.1 percent, of Fame at 83.40 rupees each for 1.8 billion rupees ($39 million), according to an advertisement in the Financial Express newspaper today. The offer is 63.5 percent more than the 51 rupees a share offered by Inox to acquire another 20 percent of Fame.

Inbox’s already owns at least 50.5 percent of Fame, according to statements sent by the Mumbai-based company to the Bombay Stock Exchange.

At present, three Anil Ambani group firms — Reliance Media Works, Reliance Capital Partners and Reliance Capital — together hold about 10.26% stake in Fame.  In a public notice, Reliance Media Works said it would make an open offer to acquire 52.48% in Fame India.  Sources said the decision to make the open offer was made at a board level meeting held on Saturday.  When contacted, an ADAG spokesperson declined to comment. The open offer is made for 2.16 crore shares at a price of Rs 83.40 per piece, much higher than that offered by Inox.  Interestingly, Inbox’s open offer for 20% additional stake in Fame is priced at Rs 51 per share. Inox has 42.68% shareholding in the multiplex chain operator.  If the open offer is successfully completed, Reliance group would have a total stake of 62.74% in Fame India.  Earlier this month, Reliance Media Works had said it would seek action against Fame for selling promoters’ stake in the theatre chain to Inox at a price much lower than it had offered earlier. Reliance Media Works also pointed out that it had offered to acquire the promoter’s stake in Fame India for Rs 80 a share, “representing an almost 100% premium to the prevailing market price”.  Meanwhile, according to the public notice, on completion of the open offer, Reliance Media Works, along with group companies Reliance Capital Partners and Reliance Capital, would have at least 2,58,24,435 equity shares of Fame. This would represent “74.22% of the fully paid up equity share capital of Fame India and 62.74% of its emerging equity share and voting capital”, the notice said.  The offer is made on a voluntary basis and is subject to regulatory approvals. Reliance Media Works said the offer to get control of Fame would help it consolidate its position in the movie exhibition industry.  The notice adds that after the acquisition, Reliance Media Works would continue to support Fame’s board of directors “in their endeavour to develop the business”.  Inox’s open offer for an additional 20% stake in Fame is to begin on April 1 and end on April 20. Few days back I asked some of Dhanvarsha members to buy Fame India shares for quick returns…since then Fame gained almost 100 %. dhanvarshagrp (2/3/2010 9:09:53 AM): fame India bought by inox...  Competitive bidding like the one witnessed in this case has gained momentum of late. Consider for example, the price war seen in Great Offshore by the two interested bidders, Bharati Shipyard and ABG Shipyard. Other than Great Offshore, there were three bids for acquiring Orissa Sponge Iron & Steel from Bhushan Steel, Bhushan Energy and Monnet Ispat & Energy last year. Such competitive bidding was first seen in 2000, when Delhi-based Abhishek Dalmia bid to acquire Gesco Corporation (now Mahindra Lifespace), but had to give up when the Mahindra group made a counter-bid.  For instance, ABG Shipyard and Bharati Shipyard wanted to acquire Great Offshore as it was forward integration for them, to be able to sell their ships and offshore support vessels. In the case of Orissa Sponge, the three steel makers were looking at the huge reserves of iron ore, a key raw material for making steel. In the case of Fame India, INOX and Reliance Media works get access to multiplex screens, which would have taken years if they did it on their own.  Hostile bids in India are difficult, similar to the western world. “In most listed companies in India, there is usually one big shareholder (promoters) who controls a large stake and so, it is very difficult to make a hostile bid,” he says. Even in case of low promoter holding, hostile bids are difficult, as in such companies there are financial institutions who prefer to go with the current managements. But, such competitive bids benefited the shareholders of target companies, as the stock price rose sharply after such competitive bids. Fame India’s stock price almost doubled after the deal with INOX. Please exit just before the open offer begins, as all the shares would not be accepted in the offer and one can buy after the offer’s close, if one considers the new management good.