Businessman Anil Ambani-led Reliance Capital Ltd threatened on Monday to take legal and regulatory action to scuttle a stake sale by Credit Suisse in Prime Focus Ltd to the company’s promoters.
Credit Suisse had agreed last week to sell a 33.12% stake in Prime Focus to the promoter group including Namit Malhotra. Subsequently, the promoters made an open offer to acquire another 26% of Prime Focus from the public shareholders, as per regulatory norms.
However, Reliance Capital said in a statement the proposed sale was “a blatant abuse” of purported rights by Credit Suisse under certain lending agreements with the Anil Ambani group company.
It also said that the proposed transaction was at a “substantial discount to the intrinsic value” of Prime Focus’s shares and that it violated several laws, rules and regulations.
Credit Suisse had acquired Reliance Capital’s stake in Prime Focus by invoking a collateral against loans, according to the 2018-19 annual report of Reliance MediaWorks Ltd, the group’s media arm. The Swiss financial services giant is selling its stake to the promoters of Prime Focus for Rs 463 crore.
The promoters made the open offer at a price of Rs 44.15 per share. They will have to shell out Rs 363 crore if the offer is fully accepted. Shares of Prime Focus closed at Rs 51.80, up 0.78% in a bullish Mumbai market on Monday.
Once closed, the transaction will allow the promoters to increase their shareholding from 35% to close to 70%. At present, the promoter group owns a tad less than 35% in the company.
In 2018, VCCircle had reported that Anil Ambani-led Reliance Group was looking to exit Prime Focus.
The group, through Reliance MediaWorks Ltd, used to be the single-largest shareholder of Prime Focus, marginally ahead of the promoters Naresh and Namit Malhotra.
In 2014, Reliance Group had merged a part of its media business with Prime Focus and picked up a stake in the company. It later hiked its holding to over 44% but did not become a co-promoter of the firm.
After Credit Suisse took over part of its stake, Reliance Capital now owns about 10.57% of Prime Focus, latest shareholding norms showed.
Another significant shareholder in Prime Focus is Standard Chartered Private Equity, whose portfolio is now managed by Affirma Capital.
The private equity firm had originally invested Rs 189 crore in Prime Focus through a preferential allotment in 2012. In 2015, the PE firm bought an additional 9.7% stake for Rs 152 crore from Reliance MediaWorks.
Keynote Corporate Services is the manager to the open offer.