Battle for MCFL hots up as Zuari mulls higher bid

Tags: News

Mallya not ready to give up, calls board to draw strategy

A three-way corporate war has broken out among the Vijay Mallya-led UB group, the Saroj Poddar-promoted Zuari Chemicals and the Shailesh Mehta-owned Deepak Fertilisers for the control of the Rs 3,700 crore Mangalore Chemicals and Fertilizers (MCFL).

While Deepak Fertilizers has already put in a hostile bid at Rs 63 per share to gain majority control of MCFL, Zuari is readying a counter offer and the UB group is devising ways to retain control of the company.

“Zuari may make an open offer at Rs 65-68 a share for the floating stock and fight it out for the control of MCFL,” a top official privy to the development said.

The MCFL stock closed at Rs 70.35 in Mumbai trading on Monday. The Poddars are considering a price offer nearer to the prevailing market price.

Mallya is keen on retaining the company, as MCFL is the only entity with a fertiliser facility on the west coast. He has convened a meeting of the MCFL board of directors this Thursday to chalk out the future course of action. The corporate battle has become all the more interesting after Mallya had a change of heart and decided not to sell his stake either to the Poddars or the Mehtas.

Deepak Fertilisers has a 25.31 per cent stake in MCFL, and is bidding for 26 per cent more through the open offer. Zuari now holds about 18 per cent, bought mostly from the open market over the past 12 months.

The company is expected to make its counter offer before the MCFL board meeting on Thursday. The race now is to mop up a major chunk of the 35 per cent stake being held by small and medium shareholders. Mallya lost his grip on the company after his stake fell to 22.91 per cent, as Deepak Fertilisers picked up some of the promoters’ equity held with institutional investors.

“Whose authority will prevail in MCFL will purely depend on the retail investors now. In the interest of MCFL, this uncertainty should end at the earliest,” said a top corporate honcho privy to the developments in this southern fertiliser major.

Even if the UB group’s stake goes further down to 15 per cent, it can still try and control MCFL. Mallya will then use a specific clause in MCFL’s articles of association that allows UB group to have three directors on the board even with a 15 per cent stake.

Deepak Fertilisers has an upper hand as it has already emerged the single largest shareholder in the company. But Poddar has an advantage, which is his first right of refusal in case Mallya finally calls it a day and exits MCFL.

MCFL produces a range of farm nutrients, including di-ammonium phosphate (DAP), urea, muriate of potash (MOP), granulated fertilisers, micronutrients and soil conditioners.

As on date, MCFL’s outstanding dues payable by the government towards subsidy is in excess of Rs 900 crore. While a chunk of the dues has apparently been paid up last month, they may again move up to this level by June, sources told Financial Chronicle.

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