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INDIA
BUSINESS WORLD -
MARCH 2005
THE MONTH THAT WAS
MALLYA
BUYS CONTROLLING STAKE IN SHAW WALLACE
After
years of legal jousting, public spats, hostile takeovers and
intense backroom lobbying, one of corporate India's fiercest
rivalries has fizzled into history, leaving behind a flamboyant
victor exulting over his expanded empire.
The dapper Rajya Sabha MP Vijay Mallya's deal to buy Shaw
Wallace ends a colourful and bitter chapter in India's corporate
history, which began in Kolkata in 1985 and ended on a balmy,
spring evening of March ‘05 in Mumbai.
“I started the quest for Shaw Wallace in March 1984, exactly
20 years ago. My mother telephoned me from London today and
said what is destined will happen,” Mr Mallya, the chairman
of UB Group, India's largest liquor manufacturer, said at
a late evening press conference.
McDowell & Co, part of the UB group, has valued Shaw Wallace
at about Rs 1,300 crore, paying about Rs 678 crore at Rs 260
per share for the Chhabria family's 55% stake. Separately,
the family has also been paid Rs 169 crore as non-compete
fee, taking the total amount paid to Rs 847 crore.
McDowell will also offer Rs 260 per share to buy a further
20% of Shaw Wallace. If the offer is successful, the company's
additional outgo will be Rs 249.6 crore.
The deal has not come as a surprise. It has been widely speculated
ever since Mr Mallya, as a pre-emptive measure, made a hostile
bid for a 25% stake in Shaw Wallace in February at Rs 250
per share. The open offer has now been hiked to Rs 260 per
share.
Shaw Wallace shares rose 1.95% to Rs 222.10, while the BSE
500 slipped 0.94%. McDowell & Co's shares rose 4.99% to
Rs 251.60.
Analysts said Mr Mallya was attempting to make life difficult
for the Ramesh Vangal-Newbridge Capital consortium, which
was vying with UB for Shaw Wallace, and also for the Chhabria
family, forcing them to take a quick decision.
Mr Mallya's acquisition will be funded by ICICI. ICICI Securities
advised Mr Mallya, while McKinsey advised the Chhabria family.
Differences within the Chhabria family, which had initially
termed the UB bid hostile, Mr Mallya's persistent and aggressive
style and the departure of the rival bidder eventually made
things easier for UB.
Manohar Rajaram Chhabria's hostile bid for Shaw Wallace in
1985 had stunned corporate India, provoked a bitter response
from its management and sparked a long-lasting rivalry.
Twenty years later, his family's decision to sell their holding
in the liquor company to Mr Mallya's UB group is considered
no less momentous.
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