Investment Advisory Service

Friday, 4 December 2009

Great Offshore- More than meets the eye

I did some more thinking on ABG Shipyard's sale of its holding in Great Offshore. As long as ABG sold its stake in Great Offshore on the stock exchange,  it seemed a clear case of ABG leaving the game.

But Edelweiss buying that stake from ABG doesn't go down very well. Why would Edelweiss, where " Ideas create, Values Protect" buy into this company and that too for an arbitrage. Buying the stake at 570 and planning to tender it at 590 in Bharati's open offer with a low acceptance ratio doesn't seem to be an attractive trade for Edelweiss to be in. Surely , there is much more than meets the eye.

What if ABG is still in the race to acquire Great Offshore ? There is no company announcement from ABG that they have withdrawn from the race. It's possible that stake sale to Edelweiss has provided the liquidity to ABG to further revise its open offer price. Though a low probability event, this cannot be ruled out.

Dec 11 is a crucial date for that is the date by which both the acquirers can revise their open offer prices. 

Disclaimer : The above post is just an analysis of the dynamically changing situation in Great offshore. It's not a recommendation to buy or sell shares in any of the involved companies in this transaction.

Wednesday, 2 December 2009

Great Offshore- ABG call it quits

ABG sold its close to 8% stake in Great Offshore on the exchange. 
The announcement can be read here.

ABG and Bharati seem to have joined hands at the negotiating table. It has saved headache not only for Bharati and ABG but for SEBI and the other regulators as well.

This means that ABG is out of the race for Great Offshore and Bharati is going to be the uncontested suitor. Though ABG is out but the open offer made by it cannot be withdrawn . So, both the open offers made by ABG and Bharati would run simultaneously.

The contours of the deal seem to have been drawn in a manner to make sure that the financial liability on ABG is as low as possible. The offer by Bharati has been raised a bit to ensure that the difference in the open offer prices of ABG and Bharati is large enough for shareholders to tender their shares in the offer made by Bharati.

One aspect of Takeover Code which gets clarified is that in an open offer made by the acquirer, the acquirer is free to sell its existing holding in the target company during the pendency of the open offer.

Great Offshore- Update

Bharati makes the task difficult for ABG.
Should ABG quit the game now ?
1. ABG has been successful in making the acquisition expensive for Bharati by successively increasing the offer prices earlier.
2. If ABG were to increase the price now, it will end up with control and a higher stake but would have to stretch its massively leveraged balance sheet a bit more.
3. With Bharati getting close to 26% in Great Offshore, it will continue to be a pain for ABG.