The Zee group has been denied a toehold in the Hindi newspaper market as the battle for control over Hindi daily Amar Ujala's parent company has gone in favour of the principal shareholder group led by Atul Maheshwari.
Company Law Board Chairman S Balasubramanian on 11 July passed an order, which directed the Atul Maheshwari group to buy out the 35.33 per cent equity in Amar Ujala Publications from minority shareholders for Rs 138 crore.
The Maheshawari group is required to pay the minority shareholder group led by Ajai Agarwal over a period spanning nine months, beginning August 1, 2006.
The CLB order came after a long battle between promoters of Amar Ujala for control of the newspaper.
The Zee group had got involved after signing a memorandum of understanding with Ajai Agarwal to finance his group's attempt to buy out the majority shareholder group.
A member of the Maheshwari group told Business Standard that the Zee group's attempt to finance Ajai Agarwal was an attempt to get into the Hindi newspaper market. Amar Ujala has a significant market share in Uttar Pradesh, Haryana and Uttaranchal.
A Zee group spokesperson refuted the Maheshwari group's claim, and said its MoU with the Ajai Agarwal group was just a financial arrangement.
The CLB chairman did not buy Zee group's argument. "A reading of the entire MoU would show it is not a financial agreement but a planned takeover agreement," the CLB order said.
The CLB order brought the motive of the Zee group into the picture because in January the CLB chairman succeeded in getting the warring promoters of Amar Ujala to accept a consent order aimed at bringing about an amicable resolution.
The essence of the consent order was that the Ajai Agarwal group got the opportunity to buy out the Maheshwari group's 64.67 per cent stake for Rs 252 crore (Rs 2.52 billion).
A condition attached to the consent order was that Amar Ujala would not fall into the hands of a third party during the process.
The Zee group signed a memorandum of understanding with Ajai Agarwal to fund a part of the buyout, but the MoU, according to the CLB order, was loose enough to lead to suspicion about the Zee group's motives.
Amar Ujala was founded by two friends -- Maheshwari and Agarwal. In the current battle, one son of Agarwal teamed up with the Maheshwari side of the promoter group.
