The Billionaire Anil Agarwal controlled Vedanta Ltd on Tuesday and began the process of seeking shareholders nod for delisting the company. The proposal need to be approved by around 66.7 percent of minority shareholders.
The company would file for a reverse book building process with the stock exchanges. In the reverse book building, shareholders bid at which price they would be willing to sell their shares. At the end of the reverse book building process, all the quotes are aggregated and a final price, known as the ‘discovered price’ is announced.
The company board will have to accept/reject the discovered the price within five working days from the closure of the book-building exercise. If the discovered price is not that acceptable to the board/acquirer, it could announce a counter offer, which will be higher than the price offered initially.
For delisting process to be successful, the promoter’s stake in the company will have to go up to 90 percent. If the promoter fails to increase his stake to around 90 percent.
The offer price of around Rs 87.50 per share, which is less than half the 52-week high of Rs 180 and just above the 52-week low of Rs 60, is lower than Vedanta’s Tuesday closing the price of Rs 88 on the BSE. It has been criticized by Institutional Investor Advisory Services (IIAS) as “opportunist”. In a regulatory filing to the stock exchanges, Vedanta said shareholders can cast their votes between 26th May and 24th June.
“Once the vote on the resolution is cast by a member, he or she will not be allowed to change it subsequently,” as it said. Vedanta Resources Limited, that owns 50.1 percent of Vedanta Limited, that has offered to acquire all of the balance 49.9 percent shareholding held by the public and delist the company from the BSE. On 18th May, the Agarwal-chaired board of directors of Vedanta Limited approved its parent, VRL’s open offer.
The last privatization of a company in the energy space happened in 2015 when Essar Oil was delisted. While the floor price for the buyback was set at around Rs 146.05 per share, the promoters agreed to pay Rs 262.80 per share a premium of around 80 percent. In all the Rs 3,064 crore was paid to the shareholders and the company delisted from stock exchanges.
In August 2017, the promoters paid former minority shareholders of Essar Oil an additional amount of Rs 75.48 per share, totaling to Rs 880 crore. The additional payout based on the price at which Russia’s Rosneft and its partners had agreed to acquire Essar Oil. This was the 1st instance where public shareholders were rewarded even after tendering their shares in a delisting company.
Vedanta had previously stated that it will simplify the group structure. Moody’s Investors Service had on 19th May told that taking Vedanta Ltd private will give promoters access to cash surpluses in the firm’s oil and gas business unit.
“If successful, the transaction will provide VRL better access to future cash surpluses and cash of around USD 1.4 billion held at Vedanta Ltd and its wholly-owned subsidiary, Cairn India Holdings Ltd, in December 2019. Additionally, VRL’s higher shareholding in Vedanta Ltd will substantially reduce cash leakage, while extracting dividends from step-down subsidiary Hindustan Zinc Ltd, which held cash of USD 3 billion at December 2019,” as it had said.