Indal rejects Sterlite offer

MUMBAI, March 12: The board of directors of Indian Aluminium Ltd (Indal) has asked its shareholders to reject the open offer made by Sterlit...

MUMBAI, March 12: The board of directors of Indian Aluminium Ltd (Indal) has asked its shareholders to reject the open offer made by Sterlite Industries to acquire 20 per cent in the company.

The rejection by Indal board comes at a time when Sterlite Industries is toying with the idea of making a revised bid at a much higher price of Rs 120 per share early next week as against Alcan’s Rs 105 offer, sources said.

The Indal board said in a statement that a committee of directors, led by Chairman S M Datta and directors, Deepak Parikh and N J Jhaveri evaluated the merits of the offer and came to an unanimous conclusion that the bid by Sterlite is not in the interest of Indal, its shareholders and other stakeholders.

Story continues below this ad

“Sterlite offer can make little contribution nor can it bring extraordinary strengths on the table even managerially, let alone technology for implementing Indal’s business strategy or capital expenditure program,” Indal officials said. The Indal committee heard presentations from SterliteIndustries, the executive managemnet of Indal and Alcan Aluminimum of Canada.

At present Alcan has 34.6 per cent stake in Indal, while the majority of 36 per cent shareholding is with the financial institutions. The rest is with the GDR holders, and Indian public.

The board of directors, however, did not make any suggestion on Alcan’s counter-offer. Three representatives of Alcan on Indal’s board attended the meeting but abstained from any participation in this matter.

"Today’s board meeting was attended by LIC nominee, S D mathur, and there was no dissent in the board in this matter," said Vijaya Sampath, vice president of Indal.

Story continues below this ad

Analaysts say that Indal’s baord’s recommendation to the shareholders will not serve any purpose as most of the sharehodlers would go for higher price offered on their holdings. If Sterlite makes a revised bid next week at much higher prices, then Alcan will not have any option but to again increase theirs. "Finally, anyone who outbids the other will win the company," saida analyst.

This revised offer from Sterlite will come after Alcan had on March 4 decided to make a counter offer for Indal’s stake at Rs 105 which was in response to the Sterlite bid at Rs 90 for a 20 per cent stake in Indal on February 16. The offer kicked off a controversy after both Indal and Alcan management termed the takeover bid as "not friendly".

It may berecalled that Suresh Thadani, chief financial officer of the Canada-based Alcan had warned that if Sterlite acquires any stake in Indal, it would be forced to review its relations with Indal and may block the technology supply.

Both Alcan and Sterlite have made already made presentations to a committee formed by the financial institutions to evaluate both the Indal and Sterlite offers.

Story continues below this ad

The Indal board’s recommendation to reject Sterlite’s offer clearly suggests that it is more in favour of an association with Alcan than with Sterlite. Indal has been a professionally-run company, and therefore Sterlite cannot be expected to contribute anythingsignificant managerially.