Cadbury dashes minority hopes again

The revaluation of shares of chocolate maker Cadbury has fallen short of the expectations of minority shareholders.

Ernst & Young, the independent valuer appointed by Bombay High Court, has pegged the value of the shares at Rs2,014 apiece.

That’s around 20% less than the Rs2,500 the shareholders were expecting on the higher side. On the lower side, expectations were for a valuation of Rs2,200 per share.

The company wants to buy out the shares held by around 8,000 minority shareholders, who collectively account for around 2.4% stake.

Cadbury had delisted the company in 2003, offering Rs500 a share to shareholders. But some refused to sell out despite numerous offers from the company, including one of Rs1,340 on September 30, 2009.

Subsequently, the Bombay High Court appointed Ernst & Young, which valued the shares at Rs1,740 apiece.

Minority shareholders protested the company was not valued using the discounted cash flow method.

Also, future growth was not sufficiently reflected in the price and the data used to value the shares was not complete.

The company subsequently offered up to Rs1,900 a share.

Then, in the first week of July, the Bombay High Court asked Cadbury to consider the discounted cash flow method for the valuation. The next hearing is set for August 1.

“We will be studying the report and submitting a reply on Monday,” said Hinesh Doshi, vice-president of the Investor Grievances Forum, which represents minority shareholders on the issue.  Cadbury declined to comment.