After holding off a takeover bid for five months, the Parikh family, promoters of Zandu Pharmaceutical Works, has agreed to sell 18.18% of its stake to Emami Ltd, the Rs 600 crore Kolkata-based FMCG major.
The Parikhs will get Rs 15,000 a share, amounting to Rs 220 crore, and Rs 1,500 a share as a non-compete fee, totalling Rs 22 crore. ?This paves the way for the acquisition of Zandu because we now become the largest shareholder in the company,? Emami director Harsh Agarwal told FE after reaching a share purchase agreement with the Parikhs. The Parikh family owns 20.18% in Zandu, but according to sources, hold an additional 18-20% through associate companies. In May, Emami had bought out the stake of the Vaidyas, the other promoter family in Zandu, for Rs 130 crore, and pushed up its holding in Zandu to 27.5%. ?We will hold over 65% of the stake in Zandu after the Parikh sale and the 20% we hope to pick up from the open offer,? said Agarwal. Emami has sweetened the open offer twice, with the final price pegged at Rs 16,500 a share. Despite weak market sentiments, Emami closed at Rs 259 on the BSE on Thursday, up 12.61%; while Zandu closed 5% down at 13,639.2.
?The transition process should take a couple of months and the Parikh family will exit the board,? added Agarwal. The company will also like to keep the Zandu name ?because of its brand equity.? Total cost of the acquisition, which is almost Rs 800 crore, ?will come from a mix of internal resources and borrowings?. On October 3, Emami sought shareholder approval to invest Rs 430 crore in buying Zandu shares.
Agarwal said Zandu?s product line would provide Emami opportunities in markets in Indian and the world. Girish Parikh, MD, Zandu, said, ?Since both companies have a rich heritage and experience, by joining hands, they will now be better poised to exploit the emerging opportunities.?