Even as a court hearing this week is expected to decide the fate of AskMeBazaar and its 4,000 employees, fresh documents have emerged which show a fallout between the investor and management over a buyout offer of the company, priced at one dollar.
Even as about 4,000 employees of e-commerce firm AskMeBazaar, await clarity on status of their employment in a court hearing this week, fresh documents have emerged stating that Sanjiv Gupta, former CMD of the company tried to buy back the investor’s shares worth 98.3 percent for just USD 1.
Sanjiv Gupta, co-founder of AskMeBazaar and former Chairman and Managing Director of Getit Infoservices had offered a nominal value of USD 1 to Malaysia’s Astro Entertainment Network (AENL) in a management buyout offer (MBO).
In an email response, AENL confirmed the development, however said that it did not consider it 'as a serious MBO offer' adding that there was no point in asking AENL to put in more funding.
The MBO offer sought AENL to fund USD 30 to 50 million into Getit towards capital infusion in July. According to the document, this was a reduced amount compared to original closure cost of USD 76.5 million.
According to the non-binding expression of interest document, dated June 29, 2016, seen by Moneycontrol.com, the book value of shares of Getit including all its subsidiaries was in negative. It has cited a report by MC Jain & Co. chartered accountants for the same.
Gupta did not respond to a detailed questionnaire sent by Moneycontrol.
Getit’s companies - AskMeBazaar, AskMeGrocery and MebelKart have currently stopped trading. India’s national company law tribunal is scheduled to hear this week a case filed by Gupta against Malaysia’s Astro Entertainment Network (AENL).
A spokesperson for AENL responded saying that the MBO offer to salvage AskMe ‘was not realistic’. “AENL has thus far invested close to USD 300 million in Getit Infoservices. AENL’s shares were fully subscribed and the additional funds AENL was providing was to keep employees and statutory dues paid until the MBO takes effect. But the MBO conditions were not realistic,” the spokesperson for AENL said in an email to Moneycontrol.
Referring to the closure cost of USD 76 million, Astro said that it was not relevant when the MBO was being negotiated, because AENL got into negotiations with Sanjiv Gupta with the understanding that his intentions were to keep Getit as “a going concern”.
AENL has also denied that it was aware of any report by MC Jain & Co. on the company’s valuation. “Any company that undertakes a valuation exercise has to do so with board approval. Sanjiv Gupta had not taken the board approval to undertake this evaluation by M.C. Jain & Co. AENL, as a shareholder, was not, and is not aware of any such report,” it said.
It further alleged that if Gupta knew that the valuation of Getit was negative, then in the interest of the business and the employees, he should have immediately taken steps to stop trading, and thus stopped incurring any further liabilities, a lot earlier.
According to the Malaysian firm, post the MBO offer, AENL had responded with a letter seeking clarifications on June 5.
They further met Gupta’s lawyers on July 18. However, there was no conclusion. This was followed by a conference call on 19 July. But, as many of the terms could not be agreed, AENL did not participate in any further discussions post 19 July.
“There may have been some engagements with lawyers post 19 July but it was to clarify if the parties had changed their stand on the disputed clauses,” AENL said.
The MBO also mentions that there was a third party investor who Gupta was bringing in to invest USD 100 million. According to AENL, the name of the investor was never disclosed by Gupta.
“AENL got into negotiations with Sanjiv Gupta with the understanding that that this investor’s funding will ensure that Getit remains ‘a going concern’.
In negotiations, AENL asked for the name of this investor to be disclosed, to check for credibility,” the spokesperson for AENL said.
He further added that there was no visibility that the third party investor will to be part of the MBO sale and purchase agreement and to ensure company continues as a going concern. “Sanjiv Gupta refused to disclose the investor name and being part of the SPA was also a key reason why the MBO didn’t go through,’ AENL said.