Atlas Copco announces delisting and reverse book building process schedule…how to play this

Atlas Copco had announced intentions of delisting the Shares from BSE and PSE in October 2010…the formalities are now complete and the mode and schedule has been announced

http://www.bseindia.com/stockinfo/anndet.aspx?newsid=20eaa6da-d155-4a0e-b16b-ae6648f7516e¶m1=1

Indicative Offer Price is Rs 2250…Floor Price is Rs 1426 in the Reverse Book-building Process…Bid opens on March 7,2011 and clses on March 11,2011….Discovered Price,if any,will be announced on March 23,2011 with payouts and shares not accepted being returned on March 25,2011  

For some Tax efficiency and Planning if you hold the share consider selling it on BSE so that STT is applicable and you will get the benefit of Long Terms Gains being exempted from Tax…..Current Price is a shade below Rs 2100………this is below the Indicative Offer Price of Rs 2250….Therefore if you wish to participate in the bidding,you can repurchase these shares a day later from BSE and submit these in the Bidding Process in the March 7-11, 2011 period….However you may assume some price risk in doing so as there is a day’s lag time between your sale and repurchase…Moreover Liquidity in this counter is not too good….To eliminate this risk you can put through a simultaneous sale and purchase within your family and request your Broker to apply minimal brokerage….

……for example if you as the husband hold the shares,you can sell them to your wife on the Bolt at a price in between what is streaming on the screen…so if Rs 2095 and Rs 2098 are best buy and sell bids on screen you can input Rs 2096 as your sell order and her purchase order simulatenously on two different terminals…..the wife will now be the new Owner at Rs 2096 + brokerage etc and can participate in the reverse book-building bidding process….if her bid,which obviously should be over her purchase price is accepted,she will be subjected to tax on the capital gains made as no STT is involved…but her gains will be calculated from her purchase price  of Rs 2096+

As the whole delisting Process may be completed in March 2011 itself you could even make another play

Buy Atlas Copco at Rs 2100 on BSE and submit a bid of Rs 2250 or even above in the rbp….if the discovered price is Rs 2250 or above you will benefit 5% to 10%

Your risk is that

  • the delisting process is unsuccessful as Promoter ,Atlas Copco,Sweden may not accept the tendered prices as they being too high
  • the delisting process is successfull but the Discovered Price is less than your Purchase Cost   

To assess this risk review the following statistics

Share Price Behaviour of Atlas Copco : Current Rs 2100….52 Week High/Low :2243/751….Monthly High/Low : 2243/1852….Weekly High/Low : 2159/2091

Reverse Book-Building Process

Total Equity of Atlas Copco : 22561564 Equity Shares of FV Rs 10

Held by Swedish Promoter : 85.77 % or 18899360 Equity Shares

Public : 16.23% or 3662204 Equity Shares 

Minimum Holding Required for Delisting : 91.88% or 20730462 Equity Shares,being aggregate of pre offer Promoter holding of 18899360 shares and 50% of the offer size =>1831102 Equity Shares as per Rule 17(b) of the Delisting Rules

Looks likely that the bid will go through at a high Discovered Price of even over Rs 2250 as Atlas Copco would not be unwilling to shell out more than US $ 100 million to delist their Indian Company…this would be less than six months sales and four to five years of declared profits

Cheers !  

  

7 thoughts on “Atlas Copco announces delisting and reverse book building process schedule…how to play this

  1. Hi Gaurav,
    I have always enjoyed your detailed analysis on Demergers/ Relisting/Delistings etc.
    Would love to know your opinion on Jubilant Industries which is the Agri & Perfomance Polymers division of Jubilant Life which was demerged & listed on Feb 14th. Website http://www.jubilantindustries.com/
    This group has been an amazing wealth creator (Jubilant Life & Jubilant Foodworks).
    Valuations wise too it looks good. Should end Fy11 with sales of around 600 Crore & profit around 40-50 Crore. Its a zero debt company & total marketcap is just around 160 crore which is a tad over its Net Current Assets of around 150 Crore! Financials: http://www.jubilantindustries.com/financials.html
    Your views would be greatly appreciated.
    Disclosure: I have holdings in this stock & hence a vested interest in it

  2. On the subject of delisting, you had also blogged about the proposed delisting of BOC. However, in the case of BOC, the attempt was unsuccessful. What do investors in BOC now do?

  3. Swaroop and Rajesh… will check out the scrips requested by you…and Jose the BOC offer discovered price was Rs 600! and the tendered shares at this and below this were not adequate to meet the minimum shares required….BOC since has dropped to Rs 247 from Rs 300+….expect a revised bid at much higher price inside a year or two…it’s warm to know that minority shareholders will not allow BOC to delist at a low offer or discovered price

  4. Pls advise on buying of all delisiting candidates such as BOC KENNMETALS TATA HONEYWELL ALPHALAVAL.
    I feel in highly volatile market this kind of stocks are not hammered down badly and safe to remain as long term investor in this kind of stocks would be more appropriate for all senior players in market

  5. Manher…Records support your belief….Markets tend to quote MNCs at a premium and when there is strong whiff of delisting,the quotes tend to rise sharply…Therefore for the long haul the scrips you mention are safe…having said this,there are a few risks in this strategy….you may buy at peak….delisting may not come for years and monies may get blocked while you await without much gains and lose other investment opps ….and,as we saw in BOC recently,if the delisting does not succeed,the price drops very sharply….would be unwise to constitute your whole Equity Portfolio with such a Theme…a part of it maybe….Cheers

  6. Hi Gaurav
    Just discovered your blog
    I am holding 100 shares of Atlas copco in physical form
    can you share any information regarding company policy/Status on buyback

Leave a Reply

Your email address will not be published. Required fields are marked *