Shares of Shree Digvijay Cement were sharply lower by over 3 percent in early trade on September 5, after the company said the promoter, True North Fund VI LLP, is looking to offload as much as 50 percent shareholding to India Resurgence Fund, bringing in fresh capital and triggering an open offer.
The total consideration for the shares acquired is worth Rs 631 crore. The share sale has been agreed upon at a price of Rs 85 per share, which has a 12 percent discount to the last closing price, while the open offer price has been assigned at Rs 92.2 per share, a discount of 4 percent.
The open offer will be to purchase up to 3.85 crore equity shares of Shree Digvijay Cement, equalling 26 percent of the company's share capital. After the completion of the transaction in the SPA, the acquirers will gain control over the Shree Digvijay Cement, and private equity player True North will cease to be the promoter of the company.
Moneycontrol had reported that True North was evaluating a complete exit from the listed entity after almost 6-7 years. In November 2018, True North signed an agreement to buy Brazilian firm Votorantim Cimentos’ direct and indirect 75 percent stake in Shree Digvijay Cement.
Apart from the stake sale by the promoter, Shree Digvijay Cement also entered into a 10-year brand usage, supply and distributorship agreement with Hi-Bond Cement.
"The Distribution Agreement grants the Company exclusive long-term distribution rights in relation to distribution of 100 percent of the cement products manufactured and supplied by the Supplier," Shree Digvijay Cement said. The value of the distribution agreement is expected to be around Rs 600 crore per year and will likely change annually over the term of the agreement.
As part of the agreement, Shree Digvijay Cement will provide Hi-Bond with a refundable deposit of up to Rs 400 crore and nominate one director on the board of the company. Hi-Bond has also agreed to provide a call option to Shree Digvijay Cement, offering 100 percent stake in the company at a fair market value, which can be purchased over the next eight years.
Read more on Shree Digvijay Cement's financials here
So far this year, Shree Digvijay Cement's shares are higher by 9.5 percent, and are down 7 percent over last one year.
Recently, Shree Digvijay Cement had clarified that the reports of Adani Group eyeing the firm's port and plant assets as market speculation. The company owns and operates a captive seaport that handles 3,000-5,000 DWT vessels along the jetty, and can be used to import or export cargo.
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