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INDIAN financial institutions led by the Life Insurance Corporation (LIC) are objecting to US pharma major Pfizer's open offer to increase stake in its Indian arm from 41% to 75% on the ground that the offer price of Rs 675-a-share is too low.
"Obviously we will not participate in the offer. We think the price offered by Pfizer is not upto the company's potential," a source in an Indian financial institution said. The FIs jointly hold 21.38% shares in Pfizer. Of this, LIC holds close to 14.38% stake. The official said the open offer would not get good response without the participation by the financial institutions. Other FI shreholders include GIC, Oriental Insurance and Unit Trust of India.

Pfizer is planning to launch its open offer on June 10. According to Pfizer's announcement, it wants to consolidate its stake in the Indian arm "to create more flexibility on its commercial and financial activities in India." When contacted, a member of Pfizer board said the FIs are seeking higher price for its shares. However, the official did not elaborate. There was no response to an email sent to Pfizer MD Kewal Handa.

According to a Pfizer statement to the BSE on April 13, the offer to Indian shareholders is at 8.6% premium to the closing price of Rs 621.55 as on April 9 on the NSE. Pfizer said its offer price also gives a premium of 22.3% over the average share price during the 30 days ending April 9 on the NSE and a premium of 45% over the requisite price determined in accordance with the Sebi regulations 1997.

Incidentally, the battle between the financial institutions and Pfizer came out in the open during the company's annual shareholders meeting when LIC objected to the salary hike of Pfizer's managing director, Kewal Handa. The directors also objected to the salary and commission to the directors.

But LIC's objections were overruled by show of hands during the shareholders meeting. "The LIC objection was just symbolic. The institutions wanted to make it a point that the resolution of hiking salary and commission to directors was wrong at a time when the company is not doing well," the official said. It is imperative for Pfizer to get total control of its Indian subsidiary as it has to complete $68-billion global merger with Wyeth.

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