The Hindu Business Line : Vickers Systems: Accept

Moreover, Eaton Hydraulics Inc (EHI), which is making the open offer, already holds a substantial stake in the company and if public shareholding falls below 10 per cent as a result of the open offer, the shares might be de-listed from the bourses.

Offer details

EHI, in association with Eaton Corporation, has made a cash offer to Vickers Systems shareholders for acquiring 17.49 per cent of the equity at Rs 28 per share.

EHI held 8.08-lakh optionally convertible preference shares of Rs 100 each, of which, Rs 15 per preference share was to be converted into equity and the rest redeemed in March 2003. EHI exercised the conversion option and, as a result, its stake in the company has gone up.

EHI had made an open offer to acquire the outstanding shares of the company at Rs 25 per share in October 2002.

EHI has now made a voluntary unconditional open offer to mop up the entire equity and de-list the shares.

The earlier open offer and the expectation of another open offer sustained the interest in the stock for quite some time. Otherwise, from a pure fundamental perspective, the stock would have been languishing. The company has not made profits for the past three years and its net worth is negative. Its capital structure is highly skewed in favour of debt. This limits the return for equity shareholders.

As the stock might not fetch a better price in future and the interest in the stock is primarily in expectation of an open offer, one can use the exit opportunity

SBI Capital Markets is the manager to the offer.

The offer, which opened on May 7, closes on June 5.

BL Research Bureau

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