I receieved an email on the rumor of the open offer for Lanxess ABS yesterday from mayank. On googling i found the following news item
Lanxess ABS up on open offer hopes
In addition Lanxess ABS has posted the following on their website
Shareholders may take note that Lanxess India Private Limited, Mr Rakesh Agrawal, Mrs Uma Agrawal, Mr Rahul Agrawal, Mr. Vishal Agrawal, Geetganga Investment Private Limited and Tash Investment Private Limited, the promoters of company , have entered into an agreement on June 28, 2007 to sell their share in the Company to INEOS ABS (Jersey) Limited, a company controlled by the British chemical group INEOS. The parties expect the transaction to be completed at the end of September 2007.
So there is a possibility of an open offer. My own intrinsic value calculation is around 300 Rs / share, so even at the current price the stock is available at a 60-70% discount.
However there are some risks
1. The above is still a rumor. Rule no.1 of arbitrage is to avoid getting into such deals based on rumors.
2. Open offer may not be made at a very high premium above the current price ?
3. What happens to the minority shareholder if some decide not to accept the offer ?
I am still trying to analyse the pros and cons on the above. In addition, as i noted in the earlier email, i hold the stock and hence the above post may not be completely unbaised. so please do your own analysis.
Please feel free to leave your thoughts in comments
update : I recieved a comment from ranjit regarding the open offer announcement on BSE. So the open offer is at 201 and for 20% of the capital.
This information changes my view completely. Lanxess ABS holds 51% of the company and other indian promoters hold 19%. As both have agreed to sell out, INEOS would get 70% of the company outright. If the open offer is successful, then they could easily have 90% of the company. I am not sure of the numbers, but i think at 90% they can easily delist the company. So the key point is that investors who refuse to accept the open offer, could in the future be forced to do so. I think company has started doing well and 201 is clearly below the fair price of the company. However the developments are not surprising. This is not the first time an MNC has short changed its domestic shareholders.