The shares of Foseco India rallied nearly 19 percent to hit an all time high level of Rs 6,680 apiece on August 22 after the company announced that it will acquire 42 lakh shares of Morganite Crucible for nearly Rs 654 crore.
Foseco India announced that it has entered into a share purchase agreement to buy 42 lakh shares of Morganite Crucible (MCIL), representing 75 percent of its total share capital, for a total cash consideration of Rs 653.94 crore.
The company will buy the stake from MCIL promoters at Rs 1,557 per share. The stake acquisition will be done by issuing and allotting 11.51 lakh fully paid-up equity shares of the Foseco India (constituting 15.27 percent of its total issued and paid-up share capital), to the MCIL promoters at a price of Rs 5,674 per consideration share. MCIL promoters will get 274 consideration shares of Foseco India for every 1,000 shares of MCIL they own, as part of the preferential allotment of shares.
The stake acquisition will trigger a mandatory open offer by Foseco India. "The execution of the Share Purchase Agreement for the Underlying Transaction will trigger a mandatory open offer by the Company together with the Company Promoters (in their capacity as 'persons acting in concert’ with the Company)...for the acquisition of up to 14 lakh fully paid-up equity shares of MCIL, representing 25 percent of the total equity voting share capital of MCIL on a fully diluted basis, from the public shareholders of MCIL, at a price of Rs 1,557.15 per Offer Share aggregating to a total consideration of up to Rs 218 crore," it said.
MCIL is associated with the business of designing, manufacturing, marketing and selling crucibles and other foundry consumable products for various metal melting and handling applications. "This proposed acquisition aligns with the larger acquisition of the worldwide Molten Metal Systems business by the Vesuvius Group from the Morgan Group. The rationale for the proposed acquisition is to expand the Vesuvius Group’s Foundry business into the faster-growing non-ferrous market segment and to India, in line with the Group’s strategic ambitions. The global MMS business is complementary to the Vesuvius Group’s Foundry business and will also increase the Vesuvius Group’s global Foundry business’s exposure to the Indian market. Substantial cost synergies are expected to create value for the Vesuvius Group,” Foseco India said.
Foseco India shares later pared some gains to close nearly 14 percent higher at Rs 6,380 apiece. The stock gained nearly 30 percent in the past five days, and over 82 percent in the past six months. It currently has a P/E ratio of over 59.
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