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H-P seen to sweeten Digital offer

Calcutta, Dec. 8: Investors expect Hewlett-Packard (H-P) to shell out more than it has offered ó Rs 750 per share ó to buy out the publicly-held 1.63 crore shares in Digital GlobalSoft, its Indian subsidiary.

H-P owns 50.56 per cent of Digitalís equity. On November 30, it said it would scoop up shares held by individuals and institutions and withdraw Digitalís stock from local bourses.

Though the price for the proposed acquisition would be determined by Digitalís shareholders through bidding, H-P said it was willing to pay up to Rs 750 per share.

It had made it clear it could refuse shares if the price determined is higher. Digitalís shares closed above Rs 750 today, an indication that investors expect a better offer.

The stock closed at Rs 761.55 on National Stock Exchange, after touching a high of Rs 782.80. It rose 2 per cent over Fridayís close even as broad market indices like the sensex and nifty remained largely unchanged.

Digitalís shares jumped 12 per cent (Rs 78.50) to Rs 734 on December 1, the day after H-Pís announcement, and moved in the Rs 730-Rs 745 range last week.

It topped the Rs 750-mark today for the first time since the offer was unveiled. H-P will have to pay Digitalís shareholders close to Rs 1,225 crore if they agree to sell their shares at Rs 750 apiece.

The success of the offer depends largely on institutional shareholders. Foreign institutions hold 20.5 per cent of the companyís shares, and as an investor class owns the maximum number of shares after H-P. Indian mutual funds hold 9.13 per cent, while public holding is pegged at 18.43 per cent.

H-P said its decision to buy out the publicly held shares was based on shareholder feedback on Digitalís proposed merger with H-P (India) Software Operation Private Ltd ó popularly known as H-P services division.

Digital announced earlier this year that it would acquire H-Pís services division and merge it with itself. Analysts were upset with the price Digital had offered to pay for it, and felt the acquisition would hurt Digitalís shareholders.

Sebi levelled charges of insider trading against Digital when Alliance Mutual Fund was found to have sharply pared its holding in the company ahead of the deal. The Digital management denied the allegations.

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