At 150 euro per share, Suzlon has indeed paid a higher price for the deal, says Karthik Sadagopan, an analyst with KJMC Capital Market Services. However, the deal gives Suzlon a global footprint and an access to REpowers clients, which is likely to offset the negative impact in the long run, he said.
The race for REpower kicked off in February this year, when Suzlon launched a 1021 million euros (almost Rs 6,000 crore) counter bid for REpower Systems AG, besting Areva SAs earlier bid. The all-cash offer of 126 euros per share topped Arevas offer of 105 euros per share. Suzlons last bid for REpower was 150 euros per share. Suzlons initial bid would have been ideal, and would have given the company the required leap, Sadagopan added. But when the company announced at a recent analyst meet that it would go for a GDR and an FCCB issue to fund its buy, the companys stock came under tremendous pressure. At one point, the Suzlon stock was trading 16% lower, Sadagopan said.
But the key to the deal is that by getting around just 24% direct interest in the company, Suzlon has managed to control over 60% of the voting capital, says Mehul Mukati of Emkay Share & Stock Brokers. At 150 euros, Suzlon would have overstretched, but this is not going to happen all on a sudden. Suzlon has bought 7.7 % from the open market for 100 million euros, and expects to buy another 10-15%, for another 150 million euros. For Suzlon, the outflow of funds for Arevas holding will take effect after one year, while the same will take effect for Martimer after two years. This means that Suzlon has got the voting rights, but has deferred its payments. Even if it got REpower for its initial bid, it would not have had control over the company, Mukati adds.
...stock surges 19%