Cadburys Delisted in Jan 2003 offering a pittance of Rs 500 to minority shareholders…Nine years later it yet stubbornly fights in court those 8149 shareholders who did not sell back…These minority shareholders hold 2.4% of the equity…..On September 30,2009,Cadburys had offered Rs 1340 when E & Y had valued the share at Rs 1740…….The Last Offer price by Cadbury was Rs 1900…Court Appointed Valuer E & Y has now arrived at a DCF Valuation of Rs 2014 as directed to do so by the Mumbai High Court earlier this month …Shareholders want Rs 2500
Clearly after India liberalised Foreign Direct Investments in most sectors,allowing even 100% Foreign Parent Holding,most listed MNCs have already ,like Cadburys,delisted or considering to delist…Clearly they want our Market not our Shareholders !…..but it is important that they pay a fair or sweet price to buy back shares held by minority shareholders…but Cadburys is stubbornly,and I sense with some degree of condescending arrogance too,serving up some bitter chocolate through the years
Cadburys offered just Rs 500 in 2003…..they were forced to raised it to Rs 1340 and then even Rs 1900 !….just think….Rs 500 in early 2003 at a CAGR of 10% (assumed risk free rate) would have become just @ Rs 1100 in eight and a half years……at E & Y new DCF Valuation of Rs 2014,the CAGR works out higher at 18%…so clearly holding out for such a long time has favoured the shareholders who yet hold the shares
Methinks we are near some compromise on Offer Price now and matter should be settled soon at anywhere between Rs 2014 and Rs 2500…To twist the company ad line….Jaldi kuch Meetha hoh jayega
Blog Readers may recall that Cadburys have faced other problems too in India…they were fighting Corruption charges…and when worm infested Chocolates of their Brand were found,they had to retain for their Advertising initiative ,the credible and famous actor Amitabh Bachhan, to reach out and assure the Indian Public that Cadbury choclates were subjected to stringent quality testing and were of top quality
While top world companies are delisting in India and thus depriving Indians of the opportunity to hold some top quality MNC companies in their portfolio,it is heartening to note that Shareholder Activism in India is strengthening…MNCs cannot get away with low Offer Prices….earlier this year BOC delisting initiative suffered as Price demanded,and rightly so, by shareholders was way higher than what the company had indicated as the price
So clearly a strong Investing Theme remains that of Investing in MNCs….holding the conviction that any delisiting initiative will trigger a share price surge…..Patience is the key here…not every Investor has it ! …the holding period could be years
Check out 3M India…debt free….3M holds 76%…Equity is Rs 11.27 crs…Networth will cross Rs 650 crs by March 31,2012 with projected profits in excess of Rs 100 crs for 2011/12….At Rs 4500 share price the Market Cap is over Rs 5000 crs…..3M will need @ Rs 1250 crs to buyback at current price and delist…..Minority shareholders will demand more,if this intiiative does happen……No Bonus or Split so far on the FV Rs 10 share….IPO was way back in 1992 and last Equity Capital change was in 1994 when the Foreign Parent raised the stake to 76%…….last year 3M was at Rs 3100 and we were discussing the potential delisiting internally…Sensex has gone nowhere but 3M has gained 50%…it is likely to gain more in the years ahead
4 thoughts on “Cadburys Delisted in Jan 2003 offering a pittance of Rs 500 to minority shareholders…Nine years later it yet stubbornly fights in court those 8149 shareholders who did not sell back…Last Offer price was Rs 1900…Court Appointed Valuer arrives at Rs 2014…Shareholders want Rs 2500….now check out 3M India as a delisting candidate”
I havent researched the delisting theme yet and the risks involved. it is surely an interesting theme that has caught lot of attention but it seems risky to buy a stock which might not necessarily be cheap on an absolute basis and also if the delisting doesnt happen then it might see a sharp decline and investors might be just left with overpriced scrips.
There a no of demergers on the anvil. arent they much better opportunities than delisting candidates? If a a demerger is done in such a ratio that it creates an indiscriminate seller on the other side of the trade, who sells the demerged stock only for the reason becoz it is too small for institutional investors. I dont know if you have read the book on spinoffs by Joel greenblatt
Hi Sandesh…you have a strong valid argument for being stuck with potential delisting candidates at high prices that are not in sync with valuations….Demergers do offer clear opportunities whn the pricing is inefficient….ultimately it’s a question of Value vs Price and the Risk Assesment and Risk Taken…Cheers
what per share price i can get to physical holdings of cadbury india ltd shares.