Construction engineering company Larsen & Toubro (L&T) acquired the 20.32 percent stake of local coffee baron VG Siddhartha and firms related to him in Mindtree. It has also made an open offer for an additional 31 percent stake in the midcap IT services company, which is being categorised as a 'hostile takeover'.
An acquisition can either be amicable or hostile. When one company sells its shares to the interested party wilfully, it is a friendly acquisition. However, if the target company is resistant and the buyer approaches the shareholders of the company directly by making an open offer, it is termed as a hostile takeover.
In India, there have not been many hostile takeovers in the corporate sector. Only two of the very few became successful.
London-based NRI Swaraj Paul wanted to take over two Indian companies in 1983, Escorts and Delhi Cloth Mills (DCM) by acquiring their shares from the stock market. Paul was not successful and withdrew his bid, but the threat of a takeover shocked the companies and the Indian market.
India Cements (ICL) wanted to buyout Raasi Cements in 1998 and pursued a similar route. It made an open offer at Rs 300 per share, when the share price on the BSE was just Rs 100. The promoters sold their shares to the acquiring company, so there was no scope of tendering their stake during an open offer. ICL went on to buy out financial institutions in the open offer and increased its holding to 85 percent.
In October 2000, Abhishek Dalmia of the Dalmia Group made an open offer to acquire 45 percent stake in Gesco Corporation at Rs 23 per share. The promoters of Gesco resisted, but later reached an agreement with the Dalmia Group. Dalmia bought out their 10.5 percent stake for Rs 16 crore, at Rs 54 per share.
Emami and Zandu were also engaged in an unfriendly acquisition when the former acquired 24 percent stake in the latter from its co-founders at Rs 6,900 per share. They also made an open offer for an additional 20 percent stake. The remaining co-founders gave up their 18 percent after trying to save the company for four months. Emami ended up with 72 percent share in the company.
In 2012, Essel Group wanted a controlling stake in Iragavarapu Venkata Reddy Construction (IVRCL), an infrastructure company, where the promoters only held 11.2 percent stake. After buying a 10.7 percent stake, Essel Group changed its mind and exited the company in haste.
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