Coromandel Engineering’s new owners clear deck for open offer

The Chennai-based Murugappa Group exited Coromandel Engineering by selling its entire 73.28 percent stake to Accord Distillers & Brewers, Teyro Labs, Jam Hotels and Resorts, and Sundeep Anand Jegath Rakshagan, as per an agreement dated September 29, for a consideration of Rs 32.8 crore.

The new owners of Coromandel Engineering, who acquired the company from the Murugappa Group, have deposited all the funds needed to fulfil an offer to buy shares held by minority investors, ending uncertainty over the matter.

The acquirers remitted Rs 7.48 crore into the escrow account, which now has Rs 11.4 crore, equivalent to the amount needed to buy all the shares of minority investors, Fortress Capital Management Services, the manager to the issue, said in a statement on October 26.

The acquirers had initially deposited Rs 3.95 crore in the escrow account, which was just over 25 percent of the funds required due to “unforeseen circumstances beyond the control of the acquirers and despite having made persistent efforts and firm arrangements well in advance,” Fortress Capital said. This triggered uncertainty over the open offer.

The Chennai-based Murugappa Group exited Coromandel Engineering by selling its entire 73.28 percent stake to Accord Distillers & Brewers, Teyro Labs, Jam Hotels and Resorts, and Sundeep Anand Jegath Rakshagan, as per an agreement dated September 29, for a consideration of Rs 32.8 crore.

The shares were acquired from 51 individuals and entities of the Murugappa family. The deal did not include the holdings of the late MV Murugappan family, which is a little less than 3 percent in Coromandel Engineering.

Valli Arunachalam, the eldest daughter of late MV Murugappan, was engaged in a legal battle with members of the Murugappa family, demanding a rightful role in the running of the group’s business. The two sides eventually decided to settle their dispute out of court.

According to the Securities and Exchange Board of India, if an acquirer agrees to buy or has acquired control over a target company or shares or voting rights in excess of threshold limits, the acquirer is required to make an open offer to other shareholders of the company. The main purpose of an open offer is to provide an exit option to shareholders.

The open offer is for the acquisition of up to 8.46 million shares, representing a 25.48 percent stake in Coromandel Engineering, at a price of Rs 13.50 apiece from public shareholders.

Accord Distillers & Brewers is in the liquor business and has two production units – one each in Goa and Chennai. Teyro Labs makes active pharmaceutical ingredients and formulations for the pharmaceutical industry. Jam Hotels operates the Accord brand of hotels in Chennai, Ooty, and Puducherry.

Rakshagan is the controlling shareholder of Accord Distillers, Teyro Labs and Jam Hotels.