The Supreme Court on Thursday endorsed Japanese drug-maker Daiichi-Sankyo?s plea to make an open offer to shareholders of Zenotech Laboratories at a lower price of Rs 113.62 per share, rather than Rs 160 sought by the latter. This could mark the end of the bitter battle over offer price between the two companies over the last couple of years.
Setting aside the Securities Appellate Tribunal?s October 2009 ruling which had asked the Japanese drug-maker to make an offer to minority shareholders at Rs 160, a bench comprising chief justice SH Kapadia and justices Aftab Alam and Swatanter Kumar said the offer price was ?correctly worked out? by Daiichi, and that it was not acting in concert with Ranbaxy, the Indian drug company it had acquired in October 2008.
Daiichi is to make an open offer to the minority shareholders of Hyderabad-based Zenotech to acquire an 20% additional stake. Sebi regulations on takeovers require Daiichi to make a tender offer for Zenotech shares after buying the controlling stake in Ranbaxy in 2008.
Zenotech managing director Jayaram Chigurupati was out of the country and could not be reached. Other company officials declined to comment.
Zenotech Laboratories fell the most in 29 months on BSE after the court ruling in favour of Daiichi. Zenotech plunged 12% to close at Rs 99.7 the biggest fall since January 22, 2008. On Thursday, the benchmark 30-share Sensex rose 1.03%.
Markets experts said the SAT order favouring Zenotech had ?presumed too much? to arrive at its conclusion that Daiichi and Ranbaxy were acting in concert. ?The SAT decision proceeded on purely technical grounds,? said securities expert Jayant Thakur of Jayant M Thakur & Co. He added that a relook was required on pricing open offers where a company acquired has another listed company as a subsidiary.
Takeover regulations have become exceedingly complex and technical and such issues are bound to arise, Thakur said, adding that the committee redrafting these would do well to reduce the complexities.
Daiichi had argued that the SAT order was contrary to the language and intent of the 1997 takeover regulations and was unsustainable in law. It said it would pay Rs 113.62 per share to Zenotech for 68.85 lakh shares amounting to 20% equity. It further said that the relevant cut-off date for the public offer would be based on the stock price of October 20, 2008, when its deal with Ranbaxy was completed. However, SAT had said the offer should be based on January 19, 2009 prices, when Daiichi made a public announcement to acquire the additional stake through an open offer.
SAT had also set aside the order of market regulator Sebi, which had allowed the company to go ahead with the offer of Rs 113 a share. Sebi had rejected pleas of both Chigurupati, who along with his wife was holding 26% equity in Zenotech, and Narayan, who held 63,000 shares in Zenotech, that the offer price could not be less than Rs 160 per share. They had also sought a direction to Daiichi to revise the offer accordingly and pay interest at 15% for delaying the public announcement.
Senior counsel CA Sundaram and Shyam Divan, Zenotech shareholders, defended the SAT judgment, saying Daiichi and Ranbaxy came within the relationship of ?persons acting in concert? on October 19, 2008 when Ranbaxy became a subsidiary of Daiichi. On signing the agreement on June 11, 2008, Daiichi ?agreed? to take over Zenotech through the acquisition of Ranbaxy.