• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Aarati Krishnan

Shareholders in Gillette India should hold the stock as the global acquisition of The Gillette Company by Procter & Gamble of the US is expected to trigger the open offer requirement in the Indian context.

Consequent to P&G's acquisition of a 100 per cent stake in Gillette India's parent for $57 billion, an open offer may be made to mop up the residual public stake in Gillette India. According to the takeover regulations, the acquirer has a three-month time frame to make the open offer announcement.

At Rs 674, the Gillette India stock already trades at a stiff price-earnings multiple of about 37 times its earnings. However, given the small public shareholding in Gillette India, the open offer will involve a relatively small outlay for P&G. Therefore, there is a possibility that the open offer price will be at a premium to the current market price of the Gillette India stock, especially given the strategic importance of acquiring a foothold in the Indian marketplace.

The foreign and Indian promoters (the Poddars) jointly hold an 88.8 per cent stake in Gillette India, with the residual public shareholding at 11.2 per cent (consisting of 36.5 lakh equity shares). At the current market price of Rs 674, P&G will have to shell out about Rs 250 crore (about $57 million) to buy out all the public shareholders of Gillette India. But even if the open offer were to be made at Rs 800, this outlay would climb only by Rs 42 crore or by about $9 million. The indicative offer price, according the Takeover Code, may be at about Rs 640.

With P&G training its sights on the Asian region to fuel growth, India would be a strategically important market. The strategic price cuts that it has taken on its brands over the past year are indicative of its willingness to invest significantly to secure the long-term growth of its Indian business.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Fine-tuning the Takeover Code — Better bargain for shareholders

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line