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Aarati Krishnan

THOUGH the open offer price of Rs 157 per share is not very attractive, shareholders in Aventis CropScience India may tender to the offer. Even if a portion of the company's shareholders do so, it is likely to reduce the liquidity in the stock on the bourses, making it difficult for small shareholders to exit at an attractive price at a later date.

Bayer CropScience AG has indirectly acquired a 67.1 per cent stake in the Indian company — Aventis CropScience India. Bayer CropScience and its associates are now making an open offer to mop up the residual 32.92 per cent stake. The Rs 157 appears low and does not offer much of a premium for control. It discounts Aventis CropScience India's 2001 earnings by a mere seven times. This is much lower than the valuation enjoyed by peers such as Monsanto and United Phosphorous.

However, Aventis CropScience India shareholders who do not tender to this open offer may suffer from a few disadvantages. The Bayer group may pursue the offer until the public holding falls below 10 per cent, when it will be entitled to seek delisting. By using the initial opportunity to exit, shareholders can put their funds to good use elsewhere, instead of waiting for the second open offer.

This apart, with the global consolidation of Aventis' crop science business with that of Bayer, there is bound to be a reorganisation of its product portfolio and businesses. Moves to sell/divest a few product lines or to merge Aventis' crop science business with that of Bayer's are bound to have implications for the Indian shareholders of Aventis CropScience. This creates considerable uncertainty. Shareholders may thus be better off taking this opportunity to exit from the stock.

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