ITC still keen to hike stake in Oberois' EIH, but rules out hostile moves
26 November 2009
India's cigarettes-to-hospitality group ITC Ltd is open to raising its stake in hotel chain operator EIH Ltd "if circumstances change," its chairman said ysterday.
"If somebody goes (to buy a stake) in EIH, we might rethink on increasing our stake," Y C Deveshwar told reporters on the sidelines of an industry conference in Mumbai. The announcement sent the ITC scrip soaring on Thursday morning.
Deveshwar also said that ITC isn't in favour of a hostile takeover. ITC has a 14.98 per cent stake in EIH, a shade less than the Securities and Exchange Board of India threshold limit of 15 per cent which triggers a mandatory open offer for another 20 per cent.
In mid-October, EIH had said its founders were in talks with Analjit Singh, the founder and chairman of healthcare company Max India Ltd., to partly sell their stake in the company, which runs the Oberoi and Trident chain of hotels.
ITC said that it will position itself so that it gains extra leverage in any future negotiations concerning its plans for EIH. The company is exploring the option of increasing its stake to 25 per cent, just 1 per cent shy of the level which will give it the power to veto board resolutions.
This in effect means that ITC will have to make an open offer for acquiring an additional 20 per cent.
The Oberoi family, which owns 43 per cent in EIH, will sell a little over 17 per cent to Analjit Singh for up to Rs1,250 crore, valuing the company at more than Rs7,200 crore.
Along with Singh's shareholding through purchases in the open market, his stake will rise to 26 per cent. Singh and the Oberoi family will own a 52 per cent stake in EIH, hoping to fend off any possibility of rival ITC attempting to gain control.