Even as newspapers reported that Deepak Fertilisers had bought 1 million Mangalore Chemicals & Fertilisers Limited (MCFL) shares and raised its stake in the UB Group firm to 25.3% on Thursday (April 24), Dr S Raghunath, Professor of Corporate Policy & Strategy, offers quick insights into the benefits of the strategic tie-up.
What is your take on the Deepak Fertilisers' bid for the Mallya firm? According to news reports, Deepak Fertilisers has made an unsolicited bid for Mangalore Chemicals, while Zuari Fertilisers is expected to make a counterbid...
Deepak Fertilisers is one of the best professionally managed firms in the Fertiliser industry. It is good news for the industry that a strategic buyer is seriously bidding for MCF. Such a long-term player in the industry if successful in acquiring the company will strengthen its own business as well as the management of MCF. This is a potential win-win situation for the sellers and the buyer.
Will the tie-up with Mangalore Chemicals bring scale and synergies to Deepak Fertilisers, and help Deepak Fertilisers increase its exposure to agriculture-inputs business?
Yes, it will help Deepak Fertilisers attain larger scale in manufacturing and distribution and will substantially increase its market reach in South India.
Deepak Fertilisers has chosen the target carefully, is trying to avoid overpaying for it and it is known to be conservative in estimating cost savings. Currently, the offer is at 1.26 of the book value and 11 times the net profit in 2013. The company has fifty acres of surplus land that can be used to build additional manufacturing capacity.
Saroj Kumar Poddar, chairman of the Adventz Group, is equally keen to take over the firm from Vijay Mallya's UB Group. Describing MCF as a "great strategic fit" for Adventz Group's own farm inputs business, Poddar has gone on record to say that he is not going to launch a hostile bid for the company. The Adventz Group, he said, will wait till Mallya agrees to a change in management control. Do you see this happening now? Will Mallya virtually effect a buy back through this deal with Poddar?
Deepak Fertilisers paid Rs 180 crores in July 2013 for a 24.46 per cent stake in MCF while Poddar has 16.43 per cent for less than Rs 90 crores in the same period as he began buying the pledged shares of Mallya from a bank. Poddar and Mallya may prefer exit if they are made an offer they cannot refuse.
Even as newspapers reported that Deepak Fertilisers had bought 1 million Mangalore Chemicals & Fertilisers Limited (MCFL) shares and raised its stake in the UB Group firm to 25.3% on Thursday (April 24), Dr S Raghunath, Professor of Corporate Policy & Strategy, offers quick insights into the benefits of the strategic tie-up.
What is your take on the Deepak Fertilisers' bid for the Mallya firm? According to news reports, Deepak Fertilisers has made an unsolicited bid for Mangalore Chemicals, while Zuari Fertilisers is expected to make a counterbid...
Deepak Fertilisers is one of the best professionally managed firms in the Fertiliser industry. It is good news for the industry that a strategic buyer is seriously bidding for MCF. Such a long-term player in the industry if successful in acquiring the company will strengthen its own business as well as the management of MCF. This is a potential win-win situation for the sellers and the buyer.
Will the tie-up with Mangalore Chemicals bring scale and synergies to Deepak Fertilisers, and help Deepak Fertilisers increase its exposure to agriculture-inputs business?
Yes, it will help Deepak Fertilisers attain larger scale in manufacturing and distribution and will substantially increase its market reach in South India.
Deepak Fertilisers has chosen the target carefully, is trying to avoid overpaying for it and it is known to be conservative in estimating cost savings. Currently, the offer is at 1.26 of the book value and 11 times the net profit in 2013. The company has fifty acres of surplus land that can be used to build additional manufacturing capacity.
Saroj Kumar Poddar, chairman of the Adventz Group, is equally keen to take over the firm from Vijay Mallya's UB Group. Describing MCF as a "great strategic fit" for Adventz Group's own farm inputs business, Poddar has gone on record to say that he is not going to launch a hostile bid for the company. The Adventz Group, he said, will wait till Mallya agrees to a change in management control. Do you see this happening now? Will Mallya virtually effect a buy back through this deal with Poddar?
Deepak Fertilisers paid Rs 180 crores in July 2013 for a 24.46 per cent stake in MCF while Poddar has 16.43 per cent for less than Rs 90 crores in the same period as he began buying the pledged shares of Mallya from a bank. Poddar and Mallya may prefer exit if they are made an offer they cannot refuse.