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Calcutta, Nov. 30: Hewlett-Packard (H-P) today said it wanted to buy out the entire public stake of 1.63 crore shares held by institutions and individuals in its Indian subsidiary Digital GlobalSoft — formerly called Digital Equipment Corporation — in an offer that could cost the computing behemoth over Rs 1,200 crore.
Though the price per share for the acquisition will be determined by the shareholders of Digital through a process of bidding called 'reverse book building', H-P said it was willing to pay up to Rs 750 per share. At this price, H-P might have to shell out Rs 1,225 crore.
The price offered by H-P is 14.5 per cent higher than the current market price of Digital GlobalSoft's shares — it closed at Rs 655.90 on the National Stock Exchange on Friday — and nearly 50 per cent higher than the average price of the past six months.
The proposed acquisition of 1.63 crore shares will lead to delisting of Digital shares from stock markets. The acquisition would hence be conducted in accordance with the newly issued guidelines on delisting of shares, which requires the acquirer to let shareholders determine the price through bidding.
“A price of around Rs 750 gives an attractive exit to shareholders. However, we reserve the right not to acquire the offered shares if the final price as established by delisting guidelines, is over Rs 750,”H-P said.
H-P, with $73 billion in revenues in the year ended October, holds 50.56 per cent in Digital, an erstwhile Compaq subsidiary. It gained control of Digital through its global acquisition of Compaq.
In June, Digital announced a stock deal to acquire and merge with itself H-P’s wholly owned Indian arm H-P (India) Software Operation Private Ltd.
As a consequence of the merger, H-P’s stake in Digital will increase to 76.2 per cent, and public holding will fall below the minimum stipulated level of 30 per cent. H-P had two options: it could sell off a minimum of 6.2 per cent or acquire the 23.8 per cent in the company. H-P chose the latter, after looking at feedback from Digital shareholders and operational advantages.
Digital has a large number of institutional shareholders. The success of H-P's offer depends on their response to it. Foreign institutions hold 20.5 per cent of the company's shares, and as an investor class owns the maximum number of shares after H-P. Public holding in Digital is pegged at 18.43 per cent, while Indian mutual funds hold 9.13 per cent.
Hans Lidforss, vice-president of strategy and corporate development at H-P said: “Implementation of this proposal would allow us to further improve the integration of our Indian operations with each other (Digital and H-P Services division) and into our global delivery platform. It offers (at the same time) an attractive exit opportunity to public shareholders.”