Distinguishing Feature:
The most interesting fact in this deal is the acceptance by the promoters a lesser price when they can easily get the premium on their stake in Fame India.
Case Abstract:
Target Company: Fame India Limited formerly known as Shringar Cinemas Limited. The Group’s principal activities are to distribute films, exhibit films and operate through a chain of multiplexes. It operates in three segments: Theatrical, Distribution and Others. The Other segment includes programming and management contracts. Acquirers: INOX Leisure Limited is the diversification venture of the INOX Group into entertainment and is a subsidiary of Gujarat Flurochemicals Ltd. INOX has traversed its own path by bringing in a professional and service oriented approach to the cinema exhibition sector. With strong financial backing, impeccable track record and strong corporate ethos, INOX has established a strong presence in the cinema exhibition industry in the short span of time. Sellers: The sellers i.e. Shroff family belongs to the promoter group of the Target Company. From just three cinema halls, they have made the Fame India as one of the most sought-after theatre chains in the country with around 95 screens across 12 cities along with a strong presence in key markets like Maharasthra, Haryana, West Bengal, Jharkhand, Gujarat and Karnataka. Triggering event: On February 3, 2010, Inox Leisure Limited has acquired 1,50,57,751 equity shares constituting 43.28% in Shroff family promoted, Fame India Ltd. at a price of Rs 44 per share through block deal. The transaction is entirely funded by Gujarat Fluorochemicals. Further, on February 5, 2010, the acquirer have acquired 25,07,537 equity shares of Fame India at a price of Rs 50.75 per share representing 7.21% of the issued and paid up capital of the company. This acquisition will create the largest multiplex networks with a total of 55 multiplexes, 204 screens and 57,891 seats.
The Term Paper on Narrative traits in Indian cinema
In a nation that produces around 800 films a year Indian people see films a a very important part of their culture. For Indian people “cinema is integral to their lives; it is not a distant, two to three hour distraction, but an explicit life-style for them.”(Jaya Ramanathan). The large screen provides an alternative, an escape from the realities of day-to-day life. The protagonists ...
Inox had earlier bought Calcutta Cine, a Bengal Ambuja Company. This acquisition had given additional nine multiplexes to Inox in West Bengal and Assam.
Further, after the aforesaid deal, the stock prices of both the companies i.e. Fame India and INOX have started moving in the upward direction.
Controversies involved in the Battle
A takeover battle between Fame India and Reliance MediaWorks looks imminent with the latter accusing the multiplex theatre chain of rejecting its higher offer price i.e. Rs.80 a share for the promoter stake in favour of Gujarat Fluro Chemicals-promoted INOX Leisure. The questions are also being raised on why the Shroffs did not ask for a control premium on their shares, which is the general practice when the promoters surrender management control. However, according to the Shroff family, the promoters of Fame India, they have not received any written offer from Reliance Mediaworks.
Further, it is expected that Reliance MediaWorks may approach the Securities and Exchange Board of India as the next step if the issue is not resolved.
Offer Details: As after the aforesaid acquisition, the total shareholding of Inox in Fame has reached to 50.48% i.e. more than 15%, therefore, it has resulted into triggering regulation 10 of SEBI (SAST) Regulations, 1997 requiring the open offer to be made to the shareholders of the Target Company. Accordingly, on February 06, 2010, INOX has given an open offer to the shareholders of Fame India to acquire 8,231,759 equity shares of Rs. 10/- each representing 20% of the paid up equity capital of Target Company at a price of Re. 51 per share payable in cash.
On February 21, 2010, Reliance MediaWorks has given a counter open offer for 2.16 crore shares or 62.08% stake in the company for Rs 83.40 against the INOX offer for 82.31 lakh shares at a price of Rs 51 per share. As on the date of counter offer Reliance MediaWorks along with Reliance Capital Market (PAC1) and Reliance Capital Limited (PAC2) (Acquirers) holds 42,24,435 Equity Shares representing 12.14% of the equity share capital of Fame India Limited(Target Company).
The Essay on Venture Capital and Private Equity – Yieldex
1. Should Cosman accept the offer from Turn to acquire Yieldex? To support your answer, please consider the following optimistic scenario for Yieldex if it declines Turn’s offer: a) Yieldex completes a Series A financing along the lines described in the case, in which the new Series A shares are priced at $0.50. b) One year later, Yieldex completes a Series B financing for $5.7 million at a price ...
Vide corrigendum dated March 4, 2010, Reliance MediaWorks Limited (Acquirer) has increased the offer size from 2,16,00,000 to 2,17,00,000 equity shares representing 62.36% of the fully paid up and issued equity capital of the Fame India Limited (Target Company) and 52.72% of the Emerging Equity share capital and voting capital of the Target Company.
The disclosure in the PA had stated that PAC1 held 42,24,435 equity shares of the Target Company as on the date of the PA representing 12.14% of the fully paid up and issued equity share capital of the Target Company. However, after the date of the PA there was a short delivery of 1,10,942 equity shares due to close out of position by the stock exchanges.
Therefore, the actual number of equity shares held by PAC1 as on the date of the PA was 41,13,493 equity shares constituting 11.82% of the fully paid up and issued equity share capital of the Target Company.
Justification for the acceptance of INOX offer price
Author Message
Admin
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: Friday 12th February 2010 03:46:00
Whether the rejection of higher offer price of Rs.80 per share offered by Reliance Mediaworks and acceptance of INOX Leisure offer price of Rs.44 a share for promoter stake in Fame India is justified from the point of view of shareholders of Fame India?
Neha Pruthi
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: 2010-02-18 11:05:06
Though Reliance had offered a price of Rs. 80 per share, however the book value per share as well as the prevailing market price on that date was Rs. 28-30 per share, which is the actual value of shares of the company. The offer price in the INOX offer is Rs. 51 per share, which is much above the actual value. Therefore, there is no such loss to investors. Though if promoters would have accepted higher offer price of reliance, the open offer price would also have above Rs. 80, however today even the market price of the company has reached to this level because of the offer. Therefore, the investor can get the price by selling shares in market.
The Essay on The Rising Price of Food
Recent years have seen dramatic increases in the world prices for food commodities. The first half of the year 2008 saw the price of rice go up by 50% and generally speaking, similar increases in other food commodities such as maize, soybeans and wheat have been seen across the world, resulting in various forms of panic. In the Philippines, farmers have begun hoarding supplies of rice, while ...
nitesh
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: 2010-02-23 03:27:34
Yes the rejection of higher offer price of Rs 80 of Reliance MediaWork and acceptance of price of INOX of Rs 44 is unfair from investor’s point of view as the investors would have gained almost double if the Reliance offer was accepted. However as now Reliance has also given open offer at Rs 83.40, the investors will stand at profit.
Justification for the acceptance of INOX offer price
Author Message
Admin
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: Friday 12th February 2010 03:46:00
Whether the rejection of higher offer price of Rs.80 per share offered by Reliance Mediaworks and acceptance of INOX Leisure offer price of Rs.44 a share for promoter stake in Fame India is justified from the point of view of shareholders of Fame India?
Neha Pruthi
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: 2010-02-18 11:05:06
Though Reliance had offered a price of Rs. 80 per share, however the book value per share as well as the prevailing market price on that date was Rs. 28-30 per share, which is the actual value of shares of the company. The offer price in the INOX offer is Rs. 51 per share, which is much above the actual value. Therefore, there is no such loss to investors. Though if promoters would have accepted higher offer price of reliance, the open offer price would also have above Rs. 80, however today even the market price of the company has reached to this level because of the offer. Therefore, the investor can get the price by selling shares in market.
The Essay on Personal consumption expenditures price index
In their volume Consumer Demand in the United States: Analyses and Projection (Cambridge, Mass: Harvard University Press, 1970), p. 119, H. S. Houthakker and L. D Taylor presented the following results for their estimated demand equation for local bus service over the period from 1929 to 1961 (excluding the 1942 through 1945 war years) in the United States. Qt = 22. 819 + 0. 0159 Xt – 0. 1156 Pt – ...
nitesh
Member Since:
Posts : 65 Post Subject: Justification for the acceptance of INOX offer price
Posted Date: 2010-02-23 03:27:34
Yes the rejection of higher offer price of Rs 80 of Reliance MediaWork and acceptance of price of INOX of Rs 44 is unfair from investor’s point of view as the investors would have gained almost double if the Reliance offer was accepted. However as now Reliance has also given open offer at Rs 83.40, the investors will stand at profit.
Involvement of SEBI
Author Message
Admin
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Posts : 65 Post Subject: Involvement of SEBI
Posted Date: Friday 12th February 2010 03:47:48
Whether SEBI should take any action against this deal?
Priyanka
Member Since:
Posts : 65 Post Subject: Involvement of SEBI
Posted Date: 2010-02-23 03:25:48
SEBI should take action against this deal as there are many unanswered questions regarding the deal as to why the promoters of Fame India did not ask for a control premium on their shares, which is a very general practice when the management surrenders their shares and if Reliance has offered at Rs 80 earlier why the shroff family didn’t accepted their offer and finalized the deal at Rs 44 per share with INOX.
D
Member Since:
Posts : 65 Post Subject: Involvement of SEBI
Posted Date: 2010-02-24 03:44:43
i dont think that sebi’s role come into play as there was a private arrangement between inox and fame. nobody can really challenge the same
What hot in fame
Author Message
Admin
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Posts : 65 Post Subject: What hot in fame
Posted Date: Friday 12th February 2010 03:47:48
What is the driving force behind the battle for takeover of Fame India?
Neha Pruthi
Member Since:
Posts : 65 Post Subject: What hot in fame
Posted Date: 2010-02-18 11:17:50
Fame India has 25 operational multiplexes with 95
screens and a seating capacity of 26,487 in 12 cities which offers business offers significant potential for growth.
The Essay on Self Reliance By Emerson
Self-Reliance by Ralph Waldo Emerson The quote that most provoked thought and emotion from within me comes from the essay "Self-Reliance" by Ralph Waldo Emerson. "To be great is to be misunderstood" was used by Emerson to explain the lagging growth of the conception of ideas and thoughts of his generation. Original and novel ideas were scorned by conservatives who believed the best method for ...
Shweta
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Posts : 65 Post Subject: What hot in fame
Posted Date: 2010-02-23 03:29:12
Fame owns 95 screens in India. If the deal is successful INOX total screen tally will rise to 205, close to ADAG’s BIG Cinemas which is the country’s largest chain with 242 screen.
The deal will push PVR Cinemas, till now the second largest, to third position with 108 screens even after its deal to buy DT Cinema.
Competitive bid
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Admin
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Posts : 65 Post Subject: Competitive bid
Posted Date: Friday 12th February 2010 03:47:48
Whether there is scope for competitive bid by Reliance MediaWorks?
Neha Pruthi
Member Since:
Posts : 65 Post Subject: Competitive bid
Posted Date: 2010-02-18 11:11:47
Inox is already holding around 51% shares of the Company. Further, it has also give offer of 20%. However, the offer price is Rs. 51 whereas current market price is around Rs. 75, therefore it is unlikey that shares will be offered in the offer unless the price is revised. However, even still the 51% holding of INOX does not leave much scope for competitive bid by Reliance Mediaworks.
Inox’s Fame stake buy violates takeover norms: Reliance Media
23 Feb 2010, 0205 hrs IST, ET Bureau
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MUMBAI: Shares of multiplex operator Fame India surged 5% to a 52-week high on Monday after an Anil Ambani Group company made a hostile bid and
then, complained to the market regulator against the promoters of the companies involved in the deal.
Reliance MediaWorks (RMW) has said Inox’s purchase of a substantial stake in Fame violated takeover regulations. “There is non-disclosure of certain pre-existing financial arrangements between the two parties following which promoter shares in Fame had been transferred more than a year ago to a separate account where an Inox director was a joint holder,” RMW said in a February 16 letter to the Securities and Exchange Board of India (Sebi).
RMW has claimed that Inox has a joint control over Fame as it has given some loans to that company.
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In a joint statement, Gujarat Fluorchemicals (GFL), the parent of Inox, and Inox said they have noted the competitive offer by RMW and that the companies will consider the options in the best interests of the shareholders and the shareholders of Fame at an appropriate time.
The two firms also rejected allegations and insinuations made in the public announcement by RMW against Inox and GFL as untrue, baseless and misleading. RMW’s salvo is likely to heighten the battle for control over India’s second-biggest multiplex operator Fame. Reliance, which has set up multiplexes across the country under the BIG brand, is the biggest player in the business with 246 screens followed by Inox with 105 and Fame with 95. Control over Fame would have further strengthened BIG’s position. But for Inox, the deal is a potential game changer bringing it close to BIG’s position.
The battle is likely to intensify in coming weeks as Inox could be expected to up its price to match RMW’s attractive offer. The Indian market does not see too many hostile bids and the prominent ones that have been announced so far have been failures.
Bombay Dyeing, owned by Nusli Wadia, was one of the first companies to make a hostile offer for Ahemdabad Electricity Company, only to be pipped to the post by Torrent Energy. Sterlite’s (now Vedanta) efforts to go hostile on Indal also backfired with Canadian giant Alcan backing its Indian affiliate. More recently, Bharati Shipyard beat ABG Shipyard in its battle for Great Offshore after ABG entered the race to challenge Bharati.
Fame shares hit the 5% upper circuit on Monday, ending at a 52-week high of Rs 86.5, surpassing the Rs 83.5 offer by RMW. RMW, which claimed that Fame had unfairly rejected its higher offer in favour of Inox’s made a hostile bid on Sunday for 62% of Fame at Rs 83.5 per share. Inox bought 51% of Fame at Rs 51 per share two weeks ago. On Monday, the Inox management and its advisor Enam Financial were closeted in day-long meetings to counter RMW’s aggressive offer.
The Inox top brass, including director Deepak Asher, CEO Alok Tandon, and officials from Enam, which is advising Inox, were in a meeting till late Monday night. However, the outcome of the meeting could not be ascertained. It is not yet clear if Inox is considering revising its offer price.
Legal experts are of the opinion that Fame India shareholders can sell stake to any party, irrespective of the price on offer, as there is no legal obligation to sell to the potential buyer offering a higher price. “If there is a strategic fit and there are considerations other than price, shareholders can sell shares to someone offering a much lower price as well. It is not legally binding to sell to the highest bidder,” a top legal expert told ET.
Since Inox has already acquired 51% in Fame, it will be difficult for RMW to gain control of the company. Mr Shroff did not return calls made by ET. Inox also had no comments to offer.
RMW’s contention is that Fame ignored its much lucrative offer of Rs 80 per share and opted for a shockingly lower price for selling stake to Inox. RMW said it was in talks with Fame between January 20 and February 3 for buying into that company. However, Fame promoters sold 43.3% at Rs 44-45 per share to Inox. Subsequently, Inox raised the stake to 50.5% through open market purchases.
RMW has also raised questions about alleged violation of Foreign Exchange Management Act (FEMA) regarding certain security arrangements made in relation to foreign currency convertible bonds (FCCBs) issued by Fame. Sebi has not yet responded to RMW.
Rel MediaWorks to move Sebi, RBI on Inox-Fame deal
By fe Bureau
Terming it as a ‘complex’ and ‘serious’ matter, Reliance MediaWorks, the multiplex-arm of Reliance ADA Group will approach Sebi, company affairs ministry and the Reserve Bank of India (RBI) on the INOX-Fame deal that was announced last week.
This comes after media reports that Reliance MediaWorks had written a letter to the promoters of Fame India a multiplex chain that was bought by INOX Leisure last week asking an explanation as to why Fame India sold 43.28% to INOX for Rs 44 a share when Reliance had made a “firm offer” to buy it for Rs 80 a share. A spokesperson for Reliance MediaWorks said in a statement: “There has been considerable unnecessary and uninformed speculation in the media in the past few days about our company’s interest in Fame India Ltd. The issues involved are nowhere as simple as acceptance of a higher or lower price by the sellers, but far more complex and involving serious matters relating to suppression of material facts, violations of the Sebi Takeover Code, and Sebi Fraudulent & Unfair Trade Practices Regulations among others.
Meanwhile, on Tuesday Reliance Capital Partners bought 5.7 lakh shares in Fame India at Rs 59.09 per share and increased its stake in Fame to 8.1% from 6.2% earlier.
The battle between the two in the multiplex business has gained significance as the INOX-Fame deal takes INOX to the number two position in the organised movie exhibition business with a control over 205 screens and next to ADAG’s BIG Cinemas which is the country’s largest chain with 242 screens. Before the deal, PVR Cinemas with 108 screens was the second largest player among the multiplex chains.
“Reliance MediaWorks will bring all relevant facts to the notice of all regulatory authorities, including inter alia Sebi, ministry of company affairs, RB I, Income-Tax, among others for such action, if any, as they deem appropriate,” the Reliance MediaWorkds spokesperson said.
INOX refutes Rel Media charges on Fame deal
fe Bureaus
Posted: Tuesday, Feb 09, 2010 at 0014 hrs IST
Updated: Tuesday, Feb 09, 2010 at 0014 hrs IST
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Kolkata: Inox Leisure is playing down Reliance MediaWorks’ allegations that Fame India promoters sold the controlling stake to INOX at a lower price.
“We carried out the transaction in as transparent a manner as possible,” said Inox Leisure director Deepak Asher. On February 3, Inox Leisure picked up a 44% stake in Fame India, following it up with two block deals on February 4 equalling 7%. It launched an open offer to Fame India to acquire up to about 8.2 million equity shares at Rs 51 a share on February 6.
Reliance MediaWorks CEO Anil Arjun shot off an email to Fame India managing director Shravan Shroff saying that over the past two weeks in several meetings Reliance had offered a price of Rs 80 per share. Inox bought 44% at the prevailing market price of Rs 45 per share, before offering Rs 51 per share in the open offer.
“I’m not a party to the letter,” said Asher, “so I can’t respond, but we did block deals on the stock exchanges through Sebi-approved brokers. We bought the shares at market prices, there were no off-market transactions. We have complied with regulations.”
On Monday, Reliance’s Anil Arjun didn’t respond to calls, neither did Shroff. But in the email, according to Reliance MediaWorks sources, Arjun wrote he couldn’t understand how the controlling stake was sold at a price “which is nearly 50% lower than the firm price we had indicated…”
So, is a hostile takeover bid by Reliance possible? “I don’t know,” said Asher, adding, “Anything is possible.” Analysts said Reliance would possibly approach Sebi on the development.
The Fame acquisition will take Inox’s total screens to 204, 109 from Inox and 95 of Fame. Reliance has 246 screens. “We are hungry for more buys,” said Asher. “We are looking for both organic and inorganic growth, hope this is not the last deal we have signed,” he added.
After PVR’s acquisition of DT Cinemas ran into share pricing hurdles, this is the second deal in the multiplex industry which has hit a controversy.
On the BSE, Fame India closed at Rs 55.95, up 2.65%; INOX closed at Rs 76.95, down 2.4%.
The deal would make INOX the second largest theatre chain with combined strength of 55 multiplexes and 204 screens.
The multiplex segment is witnessing blockbuster deal action. Theatre chain INOX Leisure has announced the acquisition of promoters’ stake in rival multiplex chain Fame India. In a statement to the BSE, INOX said, it has acquired 43.28% stake in Fame, through bulk deals, for Rs 66.48 crore in cash. The deal would make INOX one of the largest theatre chain in the country with combined strength of 55 multiplexes and 204 screens.
The deal values Fame India at Rs 153.6 crore, a little higher than its prevailing market capitalisation of around Rs 150 crore. INOX added that it will now come out with an open offer for another 20% stake, for which it may end up shelling out another Rs 30 crore.
The per share acquisition price for INOX comes at Rs 43.7, which is just marginally short of yesterday’s closing price. This is also likely to be the price at which the open offer will be made.
The deal comes in the backdrop of PVR-DT Cinemas merger, which is expected to be completed later this month after delays. Under the deal, PVR Ltd was acquiring 26 screens operated by the DLF subsidiary in a Rs 60-crore stock-cum-cash deal. This deal is expected to take PVR’s capacity to 134 screens. The multiplex segment continues to be lead by Anil Ambani’s BIG Cinemas with over 240 screens in India. With intense competition among the theatre chains, specially in metros, the consolidation comes as a natural development.
This deal translates into valuation of Rs 1.6 crore per screen, much less thanwhat PVR is paying for DT Cinemas. To be fair, there are other factors which determine specific deals.The company also had a debt Rs 80 crore, which would have prevented INOX paying much of a premium for the acquisition.
Incidentally INOX, in which Reliance Capital owns as much as 9% stake, has been in the thick of rumours that Big Cinemas is eyeing to acquire it way back in 2007. However, there was no further development on that account. While Reliance Capital, the financial arm of Reliance ADAG which also owns Big Cinemas had at that time raised its holding from 7% to 9%, it didnt pursue the strategic acquisition.
Fame’s subsidiaries include Shringar Films (film distribution business), Big Picture Hospitality Services (food business JV) and Headstrong Films (film production JV).
Gujarat Flourochemicals (GFL), the parent firm of INOX, has funded the entire transaction through a shareholder loan. This would be the second acquisition by INOX. In 2006, it acquired Calcutta Cinema Private Ltd which ran business under the “89 Cinemas” brand.
The share price of INOX shot up by nearly 20% after the announcement to reach Rs 92 in the morning before coming down to Rs 86 levels. The shares of Fame India were down by 2.4%, trading at Rs 42.9. For FY09, Fame India reported revenues of Rs 138 crore and while INOX had a turnover of Rs 225 crore for the same period.
Enam Securities was the investment banker and Khaitan & Co was the legal advisor to INOX. Fame India was advised by Yes Bank as the investment banker and Naik Naik & Co as legal advisor.
Inox Leisure: A win-win deal
Puneet Wadhwa & Ram Prasad Sahu / Mumbai February 5, 2010, 0:38 IST
The acquisition of Fame India will help Inox Leisure scale faster at a reasonable cost.
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With Inox Leisure buying 43 per cent stake in Fame India, it seems to be a win-win deal for both companies. The all-cash deal, whereby Inox’s promoter, Gujarat Fluorochemicals, will shell out Rs 66 crore for the stake, it will add 95 screens to Inox’s kitty, taking the total number of screens for the two entities to 204 and the total seating capacity to 57,891.
This will not only catapult the combined entity ahead of the current No 2, PVR Ltd, but more importantly, it will strengthen Inox’s presence in the western India. For instance, while Fame has 32 screens in Mumbai, Inox has just six.
The acquisition will also bring into Inox’s fold Fame India’s subsidiaries — Shringar Films (film distribution), Headstrong Films (film production joint venture) and Big Picture Hospitality Services (food business joint venture).
While Inox is likely to make an open offer for a further 20 per cent stake (according to the Securities and Exchange Board of India’s guidelines), if the acquisition price is taken as base, the deal costs Inox about Rs 2.28 crore per screen, which is at a premium to the Rs 1.93 crore PVR paid for the DLF-owned DT Cinemas. The premium is justified considering the synergies and the near doubling of Inox’s exhibition business assets.
Going ahead, Inox also plans to add about 40 screens in the next financial year. Considering that setting up a screen costs about Rs 2-2.5 crore, this will entail an investment of about Rs 100 crore. While Inox is expected to generate about Rs 30 crore in cash profits during the current financial year, it will have to rely on debt to bridge the shortfall.
Further, it will also have to contend with Fame India’s debt pegged at Rs 140 crore, 60 per cent of which is foreign currency convertible bonds (FCCBs) debt due next year. However, if it manages to improve the operating profit margins of Fame India to around 20 per cent (currently at 12 per cent), it will be able to generate more cash.
The markets welcomed the acquisition, pushing up the stock prices of Fame India and Inox by 4.8 per cent and 9 per cent, respectively, at close on Wednesday. While Fame India stayed at the upper circuit for the second consecutive day after the deal was announced, Inox ended 13 per cent lower on Thursday on reports that there might be a rival bid for Fame India.
Analysts suggest that the future of the multiplex business, especially for operators with an all-India network, appears bright. From a share of 15 per cent in 2006-07, multiplex chains now accounts for about half of the box office collections.
While the first quarter of the current financial year was a disaster due to the standoff between producers and exhibitors, analysts believe multiplex owners can expect better growth in the calendar year 2010, as against the 11.5 per cent (year-on-year) posted in 2009, on the back of major releases lined up for the year.
At Rs 77, Inox trades at 19 times FY11 earnings.
