MNCs look to go private in India

Mumbai, Nov 27: A stock market that has fallen 16 per cent in 2001 has given multinationals (MNCs) operating in India the chance to do what many of them have probably always wanted: buy out their local shareholders and go private.

As ownership restrictions are eased, MNCs are lining up to make open offers to shareholders — they need more than 90 per cent of shares to delist a company — and analysts say this could drive their share prices over the next few months. The latest move came from consumer electronics and lighting giant Royal Dutch Philips NV, which last week offered to buy out the 17.14 per cent it does not own of Philips India at a hefty 35.6 per cent premium to the previous day’s close.

“Share prices of many MNCs are lower than their book values, making this a good time for the parent companies to hike stakes,” says an analyst with JM Morgan Stanley.

“The time has come for several MNCs who are struggling in India to take decisions that may not be popular with shareholders, so buying out the shareholders is the best option,” she says.

Tough decisions could include selling off units or making investments that do not pay back in the short term. But analysts say small Indian shareholders are shrewd and unlikely to sell unless the price is right.
“The main reason MNCs want to get out of the stock marketi s that they want to escape the excessive bureaucracy that comes from regulation,” Mr Arun Kejriwal, director at an independent research house said of the growing list of offers.

In early November, British confectionery and soft drinks group Cadbury Schweppes Plc said it was considering raising its stake in Cadbury India from 51 per cent at a price of no more than Rs 500 a share, a 17.7 percent premium then.

In end-August, Finnish engineering group Wartsila bid for the 49 per cent of Wartsila India it did not own at a huge 74 per cent premium to the market price.

Dutch chemicals group Akzo Nobel plans to delist its Kolkata-based drug-maker Infar India and adhesives and welding products maker Illinois Tool Works Inc has the same plan for subsidiary ITW Signode Ltd.

— Reuters