A bidding war is at works for Orissa Sponge Iron & Steel Co. Jajodias promoted Monnet Ispat & Energy has hiked the open offer price to buy additional 20 per cent stake from public shareholders of Orissa Sponge by over 19 per cent to Rs 370 a share, or Rs 10 more than what Bhushan Steel & Power has offered in its ongoing open offer. Monnet had earlier offered Rs 310 a share.
The fate of the competing bids was however sealed a long time back when Mohantys – promoters of Orissa Sponge – converted their warrants into equity and hiked their holding from 33 per cent to 43 per cent in early 2009 and at the same time, inked a partnership with the Jajodias.
Monnet Ispat Group has made the competing offer with Mohantys as a ‘person acting in concert’. The two already own over 50 per cent stake in the company, which clocked revenues of Rs 99 crore with net loss of Rs 72 crore.
Orissa Sponge Iron scrip shot up to its 52-week high before softening to close at Rs 378.05 a share, up 2.2 per cent in a flat Mumbai market on Friday. It currently has a market cap of Rs 907 crore or around 9x its annual revenues.
What the bidders are interested in is its iron ore and coal reserves, key raw material for producing steel the primary business of both Bhushan Steel and Monnet Ispat.
With the conversion of Bhushan Steel’s outstanding warrants into equity getting mired into legal tussles, it remained a minority investor and made a hostile bid. Last month, Bhushan Steel revised its bid size from 20 per cent of the company to 26 per cent at Rs 360 a share. Bhushan Steel as a group owns around 16 per cent in Orissa Sponge Iron.
Even if Bhushan Steel’s open offer is successful, its holding would remain below Mohanty-Jajodias combine. However. it may be placing its bets on garnering a large stake now and hoping for a positive result in its favour over the disputed warrants, which if converted into equity could have made it a serious challenger to take over the Bhubaneswar-based company.
Earlier Baring PE Asia-backed Bhushan Power & Steel, promoted by Sanjay Singal, former co-promoter of Bhushan Steel, had also put a competing bid. But Bhushan Power has since then acquired majority stake in another listed company Nova Iron & Steel.
(Edited by Prem Udayabhanu)