InvestorQ : Why was the response to the open offer by Adani group for the shares of Ambuja Cements and ACC Ltd and why was it so poor?
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Why was the response to the open offer by Adani group for the shares of Ambuja Cements and ACC Ltd and why was it so poor?

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Rashi Mehra answered.
3 weeks ago
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The Adani group just closed its Rs31,000 crore open offer acquiring an additional 26% stake in of Ambuja and ACC. However, the relatively tepid response from the shareholders was rather disappointing. The Adani group had made an overall investment bid of $10.5 billion to get a majority stake in Ambuja Cement and ACC after it had bought the entire stake of Holcim of Switzerland, which was a substantial stakeholder in ACC and Ambuja. The timid response could be attributed to the open offer price being lower than market price.

Here is a look at what happened to ACC. The Adani group offered to buy 4.895 crore shares of ACC, equivalent to 26% of the outstanding capital of the company. This bid was made at a price of Rs2,300 per share. Eventually, Adani got tender offer for only just about 40.61 lakh shares as the market price was more than 15% above the open offer price. As of Friday, the 09th of September, the open offer for both the stocks has already closed. Adani has just about got 8.3% of the number of shares that were supposed to be tendered.

How did Ambuja Cements pan out for Adani open offer? Adani had offered to buy a total of 51.63 crore shares of Ambuja Cements which would be tantamount to 26% of the company. However, at the end of the open offer period, just about 7.27 lakh shares were tendered by the existing shareholders. That is paltry 0.14% of the total offer size made by Adani group. Here again, the tender offer price was substantially lower than the price sought. For example, the Ambuja stock price was Rs454 while open offer price was Rs385.

It was a mix of nostalgia for the old cement companies and an unattractive price that kept most of the investors from the open offer. Adani is desperate to get both the companies under their fold as it would give them access to 70 million TPA of cement capacity and in one shot make it the second largest in India. In the last 15 years, Ultratech and Shree Cements have dominated the cement industry in terms of capacity and regional leadership. While Ultratech has 125 million TPA of cement, this deal will catapult Adani to No.2.

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