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Sell at current market price…
AAA United BV (AAA United), along with Aktieselskabet and Ashwell
Holding Co Pvt Ltd, has made an open offer to the shareholders of
Bombay Rayon Fashions Ltd (BRFL) to acquire up to 2.84 crore shares
amounting to 20% of the emerging voting capital of the company at a
price of | 300 per share. Based on the offer price, the size of the open
offer works out to | 853 crore. The offer is not conditional upon any
minimum acceptance ratio.
AAA United had earlier subscribed to 3.3 crore global depository
receipts (GDRs) issued by BRFL. AAA United proposes to convert all
the GDRs into equity shares and a resolution for the same has been
passed on March 31, 2010. The proposed conversion would
increase the shareholding of AAA United to 39.9% of the current
capital and 35.9% of the emerging voting capital. As per Sebi’s
regulations, whenever ~15% of outstanding shares or voting rights
of a listed company are being acquired, the acquirer has to provide
an exit option to the target company's shareholders
Post the offer, AAA United intends to be recognised as one of the
persons acting in concert along with the present promoters without
seeking any management rights control, representation on the
board of BRFL and/or control of policy decisions of BRFL
Exhibit 1: offer details
Offer opening date 30-May-11
Offer closing date 18-Jun-11
Last date for revision of Offer Price/ No. of equity shares 9-Jun-11
Last date for withdrawal of acceptance by shareholders 15-Jun-11
Source: Company, ICICIdirect.com Research
View
Considering a higher tax rate (to be paid in case of tendering shares in the
open offer) and a longer waiting period (as the open offer closes on June
18, 2011), we believe that an investor should sell the shares at the CMP as
the returns for a longer waiting period are not substantially higher.
We have calculated the returns for both scenarios viz. tendering shares in
the open offer or selling at the CMP. For the purchase price, we have
assumed the price in our last published report (dated February 10, 2011).
For an off-market transaction (like tendering shares in an open offer), the
short-term capital gain from shares is taxed at normal slab rates. Hence,
we have assumed three different tax slab rates under the tendering in the
open shares option. On the other hand, selling shares in the open market
would attract a normal short-term capital gains tax @ 15%.
Considering the said assumptions and a longer waiting period (as the
open offer closes on June 18, 2011), we are of the opinion that an
investor should sell the shares at the CMP in the open market as the
returns for a longer waiting period are not substantially higher.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sell at current market price…
AAA United BV (AAA United), along with Aktieselskabet and Ashwell
Holding Co Pvt Ltd, has made an open offer to the shareholders of
Bombay Rayon Fashions Ltd (BRFL) to acquire up to 2.84 crore shares
amounting to 20% of the emerging voting capital of the company at a
price of | 300 per share. Based on the offer price, the size of the open
offer works out to | 853 crore. The offer is not conditional upon any
minimum acceptance ratio.
AAA United had earlier subscribed to 3.3 crore global depository
receipts (GDRs) issued by BRFL. AAA United proposes to convert all
the GDRs into equity shares and a resolution for the same has been
passed on March 31, 2010. The proposed conversion would
increase the shareholding of AAA United to 39.9% of the current
capital and 35.9% of the emerging voting capital. As per Sebi’s
regulations, whenever ~15% of outstanding shares or voting rights
of a listed company are being acquired, the acquirer has to provide
an exit option to the target company's shareholders
Post the offer, AAA United intends to be recognised as one of the
persons acting in concert along with the present promoters without
seeking any management rights control, representation on the
board of BRFL and/or control of policy decisions of BRFL
Exhibit 1: offer details
Offer opening date 30-May-11
Offer closing date 18-Jun-11
Last date for revision of Offer Price/ No. of equity shares 9-Jun-11
Last date for withdrawal of acceptance by shareholders 15-Jun-11
Source: Company, ICICIdirect.com Research
View
Considering a higher tax rate (to be paid in case of tendering shares in the
open offer) and a longer waiting period (as the open offer closes on June
18, 2011), we believe that an investor should sell the shares at the CMP as
the returns for a longer waiting period are not substantially higher.
We have calculated the returns for both scenarios viz. tendering shares in
the open offer or selling at the CMP. For the purchase price, we have
assumed the price in our last published report (dated February 10, 2011).
For an off-market transaction (like tendering shares in an open offer), the
short-term capital gain from shares is taxed at normal slab rates. Hence,
we have assumed three different tax slab rates under the tendering in the
open shares option. On the other hand, selling shares in the open market
would attract a normal short-term capital gains tax @ 15%.
Considering the said assumptions and a longer waiting period (as the
open offer closes on June 18, 2011), we are of the opinion that an
investor should sell the shares at the CMP in the open market as the
returns for a longer waiting period are not substantially higher.
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