FIs turn down Glaxo's open-offer price

Financial institutions, led by Life Insurance Corporation, have declined to participate in the open offer made by GlaxoSmithKline (GSK) for its Indian subsidiary GlaxoSmithKline Consumer Healthcare, terming the Rs 3,900-a-share offer unattractive. The institutions, which jointly hold 32 per cent stake, also include Arisaig Partners, SBI Mutual Fund and GIC.

The British pharma and consumer products maker had announced the open offer in November last year to raise its stake in its subsidiary to 75 per cent from 43.16 per cent at present. The exercise would have cost GSK close to Rs 5,200 crore (Rs 52 billion).

Other shareholders, including retail and corporate, hold the remaining 24.94 per cent.

A series of meetings between HSBC, the banker to the open offer, and the institutions was held over the past few weeks on the open-offer price but nothing concrete came out of it, an instituitional source directly negotiating with GSK said. The institutions thought the offer was not valuing the Indian company to its potential, though they did not give any indicative price and said they would stay invested if the price was not revised.

However, the track record of domestic institutions on remaining united in open offer/delisting and royalty decisions has not been very steady. In the case of Akzo Nobel, UTI voted for the management early last year, even as other Indian institutions voted against the move to merge Akzo Nobel India with its three arms which led to the foreign company increasing its stake in the company.

When contacted, a GSK Consumer Healthcare said: "Accepting or rejecting the offer price is an individual shareholder's decision. The company cannot comment during the open-offer period." In an earlier interview, David Redfern, chief strategy officer of GSK, had said there were no plans to delist the company from the Indian stock exchanges after the parent company raised its stake to 75 per cent and it would not revise the offer price.

On Monday, GlaxoSmithKline Consumer Healthcare shares closed at Rs 3,892 a share on BSE - a tad below the open-offer price. The offer is expected to open from January 17 according to the announcement made by HSBC on behalf of GSK. The last day to revise the open offer price is January 14.

Analysts said if the FIs kept away from the open offer, the acceptance ratio for other investors was set to rise. Earlier, the minimum acceptance ratio was coming to 56 per cent. That meant, at least 56 shares would have been accepted for every 100 shares tendered in the buyback. Analysts said even if half the shares owned by the FIs were tendered in the buyback, a small investor could look forward to 75 per cent of his holding getting accepted.