Rival bidder cries foul over Aqua buyouts

On Monday, Aqua Logistics announced the acquisition of three Hong Kong-based companies — CIT, TAG and AGI Logistics — through a wholly owned subsidiary.

Done deal? Not so fast, it seems. A twist is just unfolding.
Much before Aqua took the plunge, another company, Bangalore-based Siesta Logistics Corporation, was in supposedly exclusive talks with all three.

Ashok Chattaraj, chairman and managing director, Siesta, told DNA talks between his company and the Hong Kong-based
companies were on from September, 2009 and on February 25, 2010 a master agreement on this, ging the entire scope of association, was shared with CIT, AIG and TAG, he said.

“There was an in-principle agreement for most of the clauses in the agreement and we had started the due diligence process in Hong Kong on March 9, which ended on March 28, conducted by Ernst & Young,” Chattaraj added.

As per Para 3.2 of the agreement, which was reviewed by DNA Money, till such time the implementation of the agreement is complete, the selling party cannot directly or indirectly solicit, initiate or entertain offers from, negotiate with or encourage, discuss, accept or consider any proposal, offer or inquiry (whether direct, indirect, formal or informal) of any other person in any way relating to the potential transaction.

“Despite this clause, CIT, TAG and AGI have been engaging in talks and negotiations with Aqua for potential acquisition. Even after the Aqua agreement was signed on March 26, 2010, there were final changes done and accepted by CIT, TAG and AGI on the agreement with us on March 28, 2010,” Chattaraj said.

The company had mobilised certain resources and floated an entity in Hong Kong on February 18, 2010, named Siesta Logistics Hong Kong Ltd.

“We did this only with the intention of taking over CIT, TAG and AGI,” he said.

The actions of the three are in clear violation of the legal clauses in the transition agreement, he said.

M S Sayed, vice-chairman, Aqua, he said, “Ever since we filed our
draft red herring prospectus in September last year, we mentioned that we intended to acquire three companies and it was not a sudden decision that we took. We are in talks with these companies since June last year and we started our due-diligence in March first week. After we announced the acquisition, I received a call from Chattaraj saying that his company’s agreement with the three companies is exclusive and he was supposed to mail me a copy of the agreement that he entered with them. But he hasn’t done that since 26 March. I maintain that our agreement with these companies is binding and enforceable.”

Sayed added that, once Siesta send him the copy of the agreement, he is open for a discussion on the issue.
“I also asked Alfred Lam, senior consultant and one of the brothers owning CIT, TAG and AGI about their deal with Siesta, but he confirmed to me that there was no agreement signed between the two and that there were only discussions of a possible acquisition,” Sayed added.

However Chattaraj said that since he is bound by data confidentiality agreement, he did not send across the copy of the agreement to Aqua Logistics.

“We don’t want to move the court right now, let both the parties meet and let us discuss the matter,” Chattaraj said.

But there has been no further correspondence from Siestas end to have any talks with Aqua, as mentioned by Sayed.
Aqua initially acquired 60% in the companies for a total consideration of $7.09 million (Rs 32 crore). It intends to acquire an additional 15% in tranches over five years.