Mere co-incidence or bad timing! Suzlon open offer fails to evoke much

The open offer launched by billionaire Dilip Shanghvi-controlled entities, in association with promoters of Suzlon Energy to acquire additional 26 per cent equity stake in the world's fifth-largest wind turbine maker has failed, as the public shareholders of the company did not participate in the offer. However, the preferential issue consisting 16.49 per cent of the total equity capital got fully subscribed.

An open offer is basically an offer proposed by the promoter, or management of the company, to its existing shareholders for giving back the shares to the company in lieu of a pre-decided price set by the company, which is usually more than the current market price. Therefore, an open offer is nothing but the exit route, which is given to the existing shareholders, by the acquirer of shares through a public announcement.

Under the open offer, Dilip Shanghvi and associates had to acquire 26 per cent stake for Rs 2,837 crore in the wind turbine maker. According to the proposed open offer document, price was set at Rs 18 per share and the total equity shares tendered were 157,64,38,113, which would have cost as much as Rs 2837 crore, depending upon the acceptance ratio. However, the offer received a poor response from the investors as only 4295 out of the total equity on offer could be acquired. The open offer started on December 28, 2015 and ended on January 8, 2016.

Meagre response to the offer was primarily due to the pricing, which was at a discount on the market price, at the time the offer was being made to the shareholders of the company. Average price in the market during the offer period was at Rs 21.58, which is a 20 per cent discount on the price being offered by the company to its shareholders. Usually the price offered is at a premium to the market price so as to encourage the shareholders to render their shares to the company.

As per a post-offer update, the acquirers could acquire only 4,295 equity shares against 1.57 billion equity shares on offer. With this, Tanti family and Shanghvi ended up with just around 34 per cent stake in total (Tantis 17.4 per cent and Shanghvi and group 16.5 per cent) against the proposed 59.86 per cent stake.