Mumbai: Dutch giant Koninlijke Philips Electronics NV on 21 November made an open offer to buy out the entire public holding of Philips India at a hefty premium over the current market price.
It made the open offer at Rs 105 rupees a share for the 17.34-per cent public holding at 35.6 per cent premium to Philips India's 20 November's closing quote of Rs 77.45 rupees a share.
On 21 November the Philips India scrip hit the 20-per cent upper limit and was frozen at Rs 92.90 following the announcement by the Dutch company. This is the second attempt the Dutch parent is making to buy out the entire stake and delist Philips India from Indian bourses.
In October 2000, it made an open offer to hike its stake from 51 to 74 per cent – and a month later it amended the offer to a complete buyout. The offer was also made at Rs 105 a share. But Philips fell short of its goal of gaining complete ownership as it acquired just 32 per cent stake.
According to analysts, Indian shareholders may not participate in the offer, as they believe that the company is in the process of turning around. There are also expectations that the parent company will hike the offer-price at a later stage if investors fail to tender shares in this offer.
In the July-September quarter, Philips India posted a small net profit of Rs 8.7 crore against a net loss of Rs 4.05 crore a year earlier. Sales fell 6.3 per cent to Rs 380 crore. It is expected that small shareholders would sell out and big ones would not, but the opposite happened with funds and insurance companies like the Life Insurance Corporation and the Unit Trust of India tendering shares.
Philips India shares rose sharply in May to a year-high of Rs 93.90, and again in August, both times on hopes of an open offer. The company, in August, denied harbouring plans to hike its stake. On the back of this development several MNC counters saw a sharp buying interest.
The above include, engines-maker Cummins India (up 6.38 per cent to Rs 60.85), shoemaker Bata India (up 6.41 per cent to Rs 39), sunglasses major Rayban (up 6.5 per cent to Rs 51.85), photographics products major Kodak India (up 3.55 per cent to Rs 200), Ciba Speciality (up 6.38 per cent to Rs 60.85) and Colour Chem (up 4.66 per cent to Rs 64).
Some MNC stocks have already been rising over the recent trading sessions on the back of hopes that their parents may come out with open offers at a substantial premium to the market price. For instance, Cummins jumped 38 per cent in a little over a month to the current Rs 60.85. Welding equipment-maker Esab India rose 28.50 per cent in a couple of months.
Recently, chocolate major Cadbury India surged 16.3 per cent in four trading sessions, from Rs 377.20 on 31 October 2001 to Rs 439.04 on 6 November 2001 amid the parent's announcement that it is contemplating a hike in its stake from the current 51 per cent.
Stake increases by MNC parents have been seen in Wartsila India, Carrier Aircon and ITW Signode recently. MNCs are endeavouring to make their Indian affiliates wholly owned subsidiaries to take advantage of the liberalised government policies with respect to foreign direct investment.