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Coffee Day Arm Makes Open Offer For Sical

18 November, 2010

Cafe Coffee Day retail chain owner V G Siddhartha has made an open offer to buy an additional 20% stake in Sical Logistics Ltd that could cost him as much as Rs 93 crore, resulting in a majority holding in the logistics company. This follows VG Siddhartha Group entering into an agreement with AC Muthiah Group to pick around 29.2% stake through a preferential allotment for Rs 121 crore.

The Muthiah group currently owns 42.66% stake and, post the preferential allotment, will hold 30% stake. If the open offer is fully successful (which looks unlikely as the share price is ruling at Rs 86 compared with offer price of Rs 79), then V G Siddhartha will get a majority stake as he already owns around 10% in the company, a stake acquired last week through open market purchase.

To begin with, both the South-based groups will be co-promoters of the logistics firm that is currently engaged in the business of providing integrated multimodal logistics services. Its main activities are stevedoring, port handling, shipping agency, CHA, trucking and terminal management. Sical reported a net profit of Rs 26.36 crore with revenues of Rs 537.23 crore for the year ended March 2010.

The company, through its subsidiaries operates container trains, has CFS for container handling and is in the process of developing an exclusive iron ore terminal at Ennore Port and has also been awarded the contract of mechanisation of the iron ore handling facility at the deep draft berth of the New Mangalore Port.

However, as per a Mint report, the deal involves Tanglin Retail Realty Developments Pvt. Ltd (a group company of Coffee Day Resorts Pvt. Ltd, which operates close to 1,000 Cafe Coffee Day outlets across India) that has made the open offer, to also purchase stake from current promoters.

This could be tied with the possibility of the open offer not finding many takers in which case the Muthiahs may sell stake to allow VG Siddhartha to get a majority control in the company. If the open offer fails completely, Muthiahs can then sell half of their holding to give 51% holding to VG Siddhartha while bringing down their own stake to 15%. Edelweiss is mediating the deal and also managing the open offer.

VG Siddhartha had raised a large chunk of money raised early this year from KKR, Standard Chartered Pvt. Equity and New Silk Route who invested Rs 960 crore to pick 25% in the company. This makes the group cash-rich to pursue such inorganic expansion into new business areas. It will also support the logistics needs of the existing business lines of the VG Siddhartha group that is into production and export of coffee.

What is notable is the exit of IDFC Private Equity just before the entry of the new strategic investor in Sical. The PE firm sold its 13.3% stake in the logistics company for Rs 43.8 crore through a bulk deal last week. It sold the stake for Rs 83.4 per share against its acquisition price of Rs 222 per share, taking a haircut on its three-and-half-year-old investment. Its sale price was still higher than the offer price by the new acquirer.

IDFC PE’s entire stake was acquired by Jupiter Capital Pvt. Ltd, a Bangalore-based investment company promoted by entrepreneur and politician Rajeev Chandrasekhar. Although the industrialist also has a presence in logistics business, this deal is seen as a portfolio investment.

The Mint report also said the deal is linked to repayment for FCCBs due in some time as the bondholders are unlikely to convert it into shares as the price at which it had been issued is much higher than the ruling market price.


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Coffee Day Arm Makes Open Offer For Sical

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