The early result of the open offer for Great Offshore Ltd by Bharati Shipyard Ltd and ABG Shipyard Ltd has thrown open possibilities that, if acted upon, could well prolong the takeover of India’s largest integrated offshore services.
The open offer for Great Offshore shares has led to ABG Shipyard getting a little over 8 million shares for the 12.57 million it sought, while rival bidder Bharati Shipyard Ltd got over 10 million shares against 7.83 million sought, sources said.
Consequently, ABG Shipyard will have a 21.5% shareholding in Great Offshore, while Bharati Shipyard, which will accept only 76% of shares tendered in the open offer, will see its holding in the country’s largest integrated offshore services provider rise to 43%.
This after ABG initially tried to wriggle out of the battle after making some smart profit by selling its stake in Great Offshore, a day before the open offer was to begin on December 3.
ABG Shipyard hoped for a poor response to its open offer, as it was at a significant discount—at Rs 520 a share—to Bharati’s Rs 590 per share offer.
First cut view among analysts is that while Bharati could eventually get control of Great Offshore, it could well be after surmounting many legal obstacles that ABG Shipyard could throw in its way.
The shoe, though, could be on the other foot for ABG Shipyard if Bharati Shipyard were to use stock market tactics, which could temporarily cause Great Offshore share prices to slip and result in monetary losses.
After all, ABG Shipyard has spent Rs 420 crore to get the over 21% stake in Great Offshore, and could be in a cul de sac.
Market observers state that ABG Shipyard may not appear to have the stomach for a mean fight, but it could well resort to some posturing.
For instance, it could seek a board seat on Great Offshore on the strength of its over 21% stake, they said.
While it may not be able to force an EGM of Great Offshore shareholders to consider its demand now; it could lobby regulators to enlist assistance.
Sebi sources said nothing in the rulebook restricts ABG Shipyard from seeking management control.
“ABG sought management control of Great Offshore through its open offer, so technically they can still have it even though their holding might be much lower. That is not in our purview to determine,” a Sebi official said.
ABG Shipyard is aware of the ambiguousness of the situation, and is keeping its cards close to the chest.
Dhananjay Datar, chief financial officer of ABG shipyard said the response to their offer was “good”.
“We have not decided yet. We may still go for it (management control). But we will take a call on that only after January 8,” Datar said.
Analysts are in a quandary as to what the fate of Great Offshore will now be.
“It is really difficult at the moment. The entire purpose of the open offer seems to be defeated. More than ABG, I would worry for Bharati,” an analyst with a domestic brokerage house said.
While ABG’s open offer was for getting management control over Great Offshore, Bharati had termed buying the company’s shares as “strategic investment”.
Bharati later tried to correct its stand and seek management control of Great Offshore, but Sebi rejected the proposal and asked it to go ahead as per the original plan.
ABG can also choose to sell its holding as there is no lock-in for the shares bought through the open offer.
“The situation will be trickier for Bharati as it would not like a rival to be on board of Great Offshore or to hold a large stake. They fought the battle only to find out that ABG is still there. It will be irritating,” another analyst said.
If Bharati approaches Sebi and is allowed to take management control of Great Offshore, even if it may have to make another open offer, ABG will be in a spot.
“What will ABG do with these (Great Offshore) shares. Bharati may then even push ABG into a corner and force it to sell these shares at a lower price in which case ABG will lose big time,” one of the analysts said.
ABG will also have to explain to its shareholders why it behaved in the manner it did.
“Holding onto Great Offshore shares for long without being able to acquire the company will be difficult for ABG. They anyway have a high leverage and blocking such a high amount will be costly,” said Vikram Suryavanshi of Karvy Stock Broking.
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