Prannoy Roy and Radhika Roy, promoters of New Delhi Television (NDTV), are expected to get a significant premium of 25% from the Adani Group for selling their controlling stake. The premium is in line with Securities and Exchange Board of India (Sebi) guidelines which prescribe that the acquisition price cannot be more than 25% of the volume weighted average market price for a period of 60 trading days.
This would mean that Roys could get as much as Rs 810 crore (@ Rs 460.54 per share), given that the volume weighted average market price for a period of 60 trading days was Rs 368.43. Roys are selling 26.27% (1.75 crore shares) of their stake to the Adani group. They have retained 5% of their stake.
This premium is over 50% more than the open offer price of Rs 294 to ordinary shareholders that closed on December 5.
The final payout will be known later this week.
While ordinary shareholders might be miffed with the difference in prices, what makes this deal different is the sheer timing – Roys have struck this deal after the open offer.
According to Sebi’s Substantial Acquisition of Shares and Takeovers Regulation, 2011, or SAST Regulations, both promoters and ordinary shareholders will get the same price if they sell shares during the open offer. There are three options to calculate the price: On the basis of the volume-weighted average price over 52 weeks, 26 weeks, or 60 trading days preceding the date of the public announcement.
However, since the Roys have struck the deal after the open offer, the above-mentioned rule does not apply.
When the Adani group acquired RRPR Holdings, which had slightly over 29%, it was termed hostile and the Roys were mulling a legal challenge. Once the acquisition was made, the open offer was automatically triggered. The Roys struck their deal separately after the open offer closed.
However, shareholders who tendered their shares in the open offer at a price of Rs 294, or even those who did not tender because the ruling price was much higher, would feel aggrieved. On Monday, NDTV shares closed at Rs 345, higher by 1.28%.
One view is that Adani should pay the same price to the shareholders who tendered shares in the open offer.
There has always been a debate whether there should be a premium of 25% for a controlling stake. However, the view is that controlling interest affords a distinct right to the buyer that other shareholders do not enjoy. Hence, the holder of the controlling interest ought to be entitled to a higher price than the ordinary shareholder.
While the law is on the Adani and the Roys’ side, this could be disheartening for minority shareholders as they would feel short-changed.
