My Best Pick 2016

Gaurav Parikh

 Gaurav Parikh of Jeena Scriptech Alpha Advisors articulates the changing fortunes of Astec LifeSciences 

Soumik Kar

What happens to a smaller company when a bigger and stronger company takes it over? Well, the smaller company gets stronger. Just like MRPL did when ONGC bought out Aditya Birla Group’s stake in it in 2003 and when BSE-listed Dhanprayog Investment changed its name to Westlife Development in 2008 and McDonald’s’ west and south India franchising business was reverse merged into it. Now, it is the turn of the listed Astec LifeSciences. This small company has been acquired by the bigger, unlisted Godrej Agrovet of the Godrej group.

What’s the deal?

Diversified agri business company Godrej Agrovet, a subsidiary of Godrej Industries, acquired the promoter holding of 45% in Astec LifeSciences in early April this year, paying ₹190 a share to add up to an aggregate of ₹167 crore. Astec’s equity capital stands at ₹19.46 crore at a face value of ₹10. The promoter group of founder Ashok Hiremath held a 55.29% stake in the company, which enjoys a market capitalisation of ₹475 crore. Godrej Agrovet has launched an open offer — which closes on December 8 — to acquire another nearly 51 lakh shares at ₹246.60, taking the overall acquisition cost to ₹292 crore. 

A fully successful open offer would take Godrej Agrovet’s holding in the company to 71.34%. The share purchase agreement requires that in case Godrej Agrovet is unable to move its stake to at least 50.32% in the open offer, then Ashok Hiremath, who has retained a 10% holding, will have to sell additional shares at ₹190 to Godrej Agrovet to bring the latter’s stake up to 50.32%.

So, what’s the ‘Big’ deal

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