ABG reaps windfall gains as it offloads Great Offshore stake
December 2, 2009
The race to acquire Great Offshore Ltd (GOL) has ended with the sudden exit of ABG Shipyard Ltd. With this development, Bharati Shipyard Ltd is all set to gain control over GOL.
In a release to the Bombay Stock Exchange, ABG Shipyard, the country's largest shipbuilder, said the company, along with its unit Eleventh Land Developers Pvt Ltd, have sold their 8.27% stake (almost the entire stake barring some 571 shares) in GOL.
This move from ABG caught everyone, including Bharati, sleeping as earlier on Wednesday, Bharati raised its open offer price to Rs590 per share from Rs560 per share to buy additional 20% stake in GOL. At present, Bharati through its units Dhanshree Properties Pvt Ltd (DPPL) and Natural Power Ventures Pvt Ltd holds 23.2% stake in GOL.
Earlier in June 2007, GOL promoter Vijay Sheth pledged his entire 15.5% stake with IL&FS and Motilal Oswal, who started to seek margin money following a plunge in the value of shares pledged by Mr Sheth. He borrowed the money from Bharati, with whom GOL had placed orders for some vessels.
However, in May 2009, Bharati acquired the pledged shares for Rs315 each, calling it a 'strategic investment'. Mr Sheth stepped down as vice-chairman and managing director of Great Offshore in June, clearing uncertainties about GOL's management control. As of end-September, the promoter and promoter group shareholding in GOL was nil.
Initially, even Bharati was not interested in making an open offer for GOL, but after it bought the pledged shares, ABG started buying GOL shares from the open market.
According to reports, there were some apprehensions among Bharati’s management that ABG may buy substantial shares from Mr Sheth's brothers or some institutional investors, which forced Bharati to go for an open offer. With no other option left, Bharati made an open offer to buy additional 20% stake in GOL at Rs344 per share in June 2009.
In the same month, ABG also joined the race to acquire the oil equipment and services provider GOL for a price of Rs375 per share, following which Bharati through its unit DPPL raised its stake in GOL by buying additional 4.58% stake at Rs403 per share.
Laadki Trading & Investment Ltd, Bharat Kanaiyalal Sheth, Ravi Kanaiyalal Sheth, Jyoti B Sheth and Amita Ravi Sheth sold these shares, Bharti had said in a release. It also revised its open offer price to Rs405 per share.
Following today's developments, shares of both Bharati and ABG were trading higher than yesterday's closing prices, while GOL’s scrip was down.
However, the question lingering among investors is, if ABG was not serious about its offer to GOL, then why did it make a counter offer in the first place? The reason is quite obvious. ABG bought shares in GOL for an average price of Rs406. The average selling price of GOL at 14.33hrs IST on the BSE was Rs558. Considering the fact that ABG sold 30.78 lakh shares at a minimum Rs558 per share, it thus made a cool profit of Rs152 per share or Rs46.80 crore, within a span of six months. That is a huge profit on the total investment of just Rs125 crore. Whether this move stems from the business acumen of ABG or Bharati’s sheer bad luck (it has to go on increasing its offer price unnecessarily), you can be the judge.