ABG, Bharati in bidding war for Great Offshore

Written by Corporate Bureau | Mumbai | Updated: Jun 24 2009, 07:40am hrs
A bitter battle to take control of Great Offshore Ltd kicked off on Tuesday, with ABG Shipyard Ltd, which holds a little over 2% stake in the offshore services firm, making an offer for 32.12% of Great Offshore's stake at Rs 375 a share. This is at 9% premium to Bharati Shipyard Ltd's earlier offer of Rs 344 for a 20% stake in Great Offshore, after buying 14.89% from Great Offshore promoter Vijay Sheth for Rs 315 a share in May.

In a day of high drama, Bharati Shipyard countered ABG's offer with a Rs 403 per share offer. Bharati also raised its stake in Great Offshore by buying another 4.58% from the Sheth family, taking its total stake to 19.47%. With this and the open offer, Bharatis stake in Great Offshore should go up to around 40%. ABG, meanwhile, indicated it will revise its offer, but no announcement came in till late Tuesday evening.

ABG said it along with Eleventh Land Developers offered to buy 1,25,71,072 shares, or 32.12% stake in Great Offshore. The counter-offer will open on August 13 and close on September 1. ABG plans to fund the offer through internal accruals. Bharati's open offer will begin on July 25 and close on August 13.

Meanwhile, Videocon group chairman Venugopal Dhoot, who holds around 3% stake in Great Offshore, said the fair price for Great Offshore is Rs 600 a share, and bids may touch that level driven by likely higher bids.

"Rs 375 a share (offered by ABG Shipyard in its counter-offer) is too low. The right price for Great Offshore is Rs 600 rupees (a share). The enterprise value of the company is Rs 2,500 crore, based on five times the Ebitda," Dhoot was quoted by a news agency. He, however, said Videocon will not sell its stake in Great Offshore for the next two years.

Both ABG, Indias biggest private yard, and Bharati, the second-biggest, want to buy Great Offshore as demand increases for drill ships and other offshore structures. Great Offshore looks attractive for these companies as it has a daily flow of cash, which does not happen in the case of shipyards, commented an analyst on conditions of anonymity. It is an asset rich company, and the offshore segment is looking better too, with improving oil prices. Bharati has a long association with Great Offshore, and has an edge over ABG Shipyard. But anything can happen, he added. Orders from Great Offshore constitute around 15% or Rs 300-350 crore of Bharati Shipyard's order book.

With the bidding war in progress, Great Offshore shares closed at Rs 413.60, up 7.92% on the Bombay Stock Exchange on Tuesday. ABG Shipyard shares were up 1.79% to close at Rs 213.15. Bharati Shipyard shares, however, fell 5% to close at Rs 162.50.

Rishi Agarwal, chairman, ABG Shipyard, said, There is no hostile bid. This offer is a competitive bid made in respect of Bharati Shipyard's offer. We will evaluate and take a call on revising the offer at the right time." Denying this was a sudden move from the company, Agarwal said the company has always seen Great Offshore as beneficial to it.

However, he refused to comment on how far ABG Shipyard will stretch itself to acquire Great Offshore. He said ABG has sufficient financial backup to carry out the bid. We have firm credit lines from IL&FS Financial, and substantial internal accruals as well, said Agarwal.

According to ABG Shipyard chief financial officer Dhananjay Datar, the company has cash reserves of around Rs 250-300 crore, and a credit line of Rs 310 crore from IL&FS.

The battle might intensify as Bharati Shipyard said later during the day that it will further revise the counter-offer. PC Kapoor, MD, Bharati Shipyard, told reporters, We will be revising our offer further from the current value of Rs 403. Possibly, a decision will be taken in a weeks time. Bharati plans to fund the offer through internal accruals. However, if required, the involvement of a financial investor is not ruled out. Bharati is also in the process of talking to other institutional shareholders. The company has a cash reserve of Rs 100 crore in fixed deposits. We have already put around Rs 245 crore, and there will be an additional requirement of another Rs 250 crore. We will use our internal accruals for funding. However, the possibility of a financial investor cant be ruled out, said Kapoor.