BackBombay HC asks Cadbury to pay Rs2,014.50 per share for buyback
Price 50% more than original offer of Rs1,340; firm will have to shell out Rs151.31 cr more to complete the buyback
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Mumbai: The Bombay high court on Thursday directed Cadbury India Ltd to pay ₹ 2,014.50 per share to buy back its stock, 50% more than its original offer of ₹ 1,340 made in 2009. The buyback has faced repeated challenges from minority shareholders who feel they deserve more.
Cadbury India will have to shell out ₹ 151.31 crore more to complete the buyback, according to the order by Justice Gautam Patel.
The court, however, criticized the conduct of the minority shareholders.
They “persistently objected to every single proposal, offer and valuation", and levelled allegations against valuers, “including the court-appointed valuers, EY (formerly Ernst & Young)," the court said.
“It is one thing for an objector to say that it has been hard done by a petitioner-company. It is quite another to accuse a firm of independent professionals appointed by the court of bias and worse," the order said.
After the original offer was made in 2009, minority shareholders, who claimed the firm’s valuers had looked only at profitability and ignored the value of its assets, approached the high court for relief.
The high court appointed EY to revalue the shares.
EY recommended a price of ₹ 2,014.50 per share, which was not acceptable to the minority shareholders.
An email sent to a company spokesperson seeking comment did not elicit any response. Text messages and calls to his cell phone were unanswered.
Ajay Samant, a senior advocate representing the minority shareholders, had said: “Shares of Cadbury India should be valued at ₹ 2,500 apiece, excluding interest and a control premium for shareholders."
Thursday’s court order said it found no merit in the minority shareholders’ contention that they were being treated badly by the firm.
Shriram Subramanian, founder and managing director at proxy advisory firm InGovern Research Services, said: “India still doesn’t have a 100% squeeze out and quick delisting which helps the acquirer, and mechanisms for credible third-party valuation that would be truly independent of the company and the acquirer, and satisfies minority investors," Subramanian said.
Experts feel that the high court ruling will hopefully bring an end to this long-drawn case.
However, it looks unlikely that the matter will end with the high court order. Alok Churiwala, the main petitioner in the case, said he may file an appeal before the division bench of the Bombay high court after consulting with the other shareholders. “We will take necessary action after going through the order carefully," Churiwala said.
Vinod Dadlani, a minority shareholder, termed the order disappointing. “There is no mention of the interest to be paid after waiting so long for no fault of minority shareholders," Dadlani said. He is yet to see the order.
This was the first instance of minority shareholders of a company approaching a high court for relief.
Cadbury Plc, Cadbury India’s former parent, was bought by Kraft Foods in 2010 for $19.6 billion. In April, Cadbury India Ltd, a subsidiary of Mondelez International Inc., changed its name to Mondelez India Foods Ltd.
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