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Open offer for Forbes Gokak at Rs 80

Our Bureau

MUMBAI, Oct. 13

MERCHANT banker J.M. Morgan Stanley, today informed the BSE that Sterling Investment Corporation Private Ltd along with Shapoorji Pallonji & Company Ltd and Cyrus Investments Ltd, will make an open offer to acquire up to 20 per cent of the issued and pai d up equity share capital of Forbes Gokak Ltd.

The offer, at a price of Rs 80 per share, covers 24,90,681 shares of Forbes Gokak. All the shares acquired pursuant to the offer will be acquired by Sterling alone, the statement to the bourse said.

The move is in tune with the promise made earlier in the part divestment of the Tata Group's equity stake in Forbes Gokak to the Pallonji Mistry Group owned-Sterling.

The offer opens on November 28 and closes on December 27.

The record date for the purpose of determining the names of shareholders to whom the Letter of Offer would be sent, is October 16.

The Forbes Gokak scrip closed at Rs 52.35, down from the earlier close of Rs 54.65, at the BSE on Friday.

On October 9, the Tata Group's sale of 6.77 per cent equity in Forbes Gokak, to Sterling, on spot transaction basis at a price of Rs 80 per share, was officially disclosed. The Tatas used to hold 25.06 per cent of the Rs 12.45 crore-equity share capital of Forbes Gokak.

With the sale, the Pallonji Mistry Group's equity holding in Forbes Gokak moved up to 14.88 per cent from the earlier 8.11 per cent, while that of the Tatas reduced to 18.29 per cent, including the residual 8.05 per cent held by Tata Investment Corporati on which is to be divested later.

The sale featured a full offloading of the shares held by Tata Sons, Ewart Investments and Bambino Investments and a part divestment of Tata Investment Corporation's stake.

It was announced then itself that the Pallonji Mistry Group had agreed to make an open offer to pick up an additional 20 per cent of the equity share capital of Forbes Gokak, at the price of Rs 80 per share.

Meanwhile, Forbes Gokak informed the BSE that the company's board has approved in principle a proposal to open a dialogue with AB Electrolux, Sweden, to acquire their 40 per cent shareholding in the joint venture Eureka Forbes Ltd (EFL).

Forbes Gokak currently holds 60 per cent equity in EFL.

The dialogue sought to be initiated will also look into the terms and conditions and the time schedule of the proposed transaction.

Not surprising at all

Suresh Krishnamurthy

BL Research Bureau

With the board of Forbes Gokak Ltd meeting to consider buying out Electrolux's stake in Eureka Forbes, the latter's exit seems imminent. The trend is in line with what has been witnessed across many segments of Indian industry. Overseas companies normall y join hands with a local group as part of their entry strategy. Wishing to go alone later, when they have started to understand the market better, has been the norm rather than the exception.

In the case of Electrolux, the exit from Eureka Forbes is a culmination of their business re-organisation that was started early this year. Electrolux merged three of its subsidiaries - Electrolux Kelvinator, Electrolux India (a joint venture with Voltas ) and Intron.

Eureka Forbes, which is into the business of floor-care products and water purifiers and filter, was left out of the restructuring then. Now, it appears that Electrolux probably wanted to exit the venture. Electrolux holds a 40 per cent stake in Eureka F orbes.

Without exiting the venture, its Indian subsidiary in which it holds a majority stake would not have been able to enter the business of floor care products (vacuum cleaners). Under the existing administrative norms on foreign investment, consent of the j oint venture partner is required to enter the same business segment on its own.

Exit from the venture is a solution and that now appears to be have been addressed. How badly it wanted to exit from the venture would be reflected in the price at which Forbes Gokak buys the stake of Electrolux in the venture if the example of Suzuki's exit from TVS Suzuki is anything to go by.

As for Forbes Gokak, it does not use any of Electrolux's brands in India. Vacuum cleaners, water purifiers and filters are marketed under brand names which are not Electrolux's brands. As such, it would be business as usual. Except, they may have to pay for technical or manufacturing expertise that they source from Electrolux.

However, the name of the company has to be changed since Eureka is a brand owned by Electrolux. Eureka Forbes is also a profit-making company. The company recorded sales of Rs 309.65 crore and profits of Rs 12.64 crore for the year ended March 2000.