Kolkata-based personal care products maker Emami, which made a hostile takeover bid for Zandu Pharmaceuticals, on Friday forced the latter to withdraw a plan to offer preferential shares to its promoters.
Zandu had sent notice to the Bombay Stock Exchange late on Thursday evening saying its board would meet to discuss a preferential share issue to the promoters and directors.
Emami lawyers swung into action and sent legal notice early on Friday to Zandu's board. On Friday, Zandu said it had dropped the proposal.
The preferential issue would have directly benefited the Parikh family, which is fighting Emami's takeover bid.
Emami Director Harsh Agarwal said that the offer is "detrimental to the minority shareholders' interests." "We sent a legal representation today to Zandu's independent directors saying preferential shares at this juncture would not be in the interests of all shareholders," he said.
The notice said the preferential allotment is unsolicited and goes against the letter and spirit of the Securities and Exchange Board of India's takeover code. "The independent directors of the Zandu board were kind enough to understand our point of view and dropped the resolution," Agarwal added.
Agarwal said Emami has offered to share the management of the company with the Parikhs and reiterated that the offer is on the table.
Emami also said it was not planning to revise its offer price for Zandu Pharmaceuticals. "We think we have done a fair valuation keeping in mind the industry standards," a company statement said.
Emami has offered to pay Rs 7,315 a share for Zandu Pharmaceuticals. The company's shares closed 4 per cent down at Rs 9,949.90 on the BSE. Zandu's share price is hovering above the open offer following speculation that Emami would raise its price. Emami's open offer to Zandu's shareholders opens July 24 and closes August 12.
Mumbai-based Zandu became a takeover target after one of its big shareholders, the Vaidya family, decided to sell its entire 24 per cent shareholding to Emami, taking the latter's stake to 27.5 per cent. Though the Parikhs claimed they had first right of refusal in picking up their co-promoters' shares, Agarwal said Emami had not come across any such agreement.
Emami bought the Vaidya family's stake at around Rs 130 crore, paying Rs 6,900 (including non-compete fees of Rs 100) per share. The Parikhs did not comment despite repeated attempts.