The Telegraph
Since 1st March, 1999
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Open offer twist to Herbertsons spat

Mumbai, Aug. 1: The Securities and Appellate Tribunal (SAT) today ordered Kishore Chhabria to make an open offer for 20 per cent of Herbertsons, along with interest at the rate of 15 per cent from February 1995.

The ruling overturns a February 2002 decision by the Securities and Exchange Board of India (Sebi) that asked UB group chief Vijay Mallya and Chhabria to divest stakes. Mallya is not bound to sell his shares any more.

“If Sebi’s order to sell such a huge quantity of shares is carried out, it would bring down the stock price, which is around Rs 34 on BSE,” the SAT order said.

Chhabria has to make a public announcement to acquire shares of Herbertsons within three months of this order at a price that will be determined with October 27, 1994 as the date of reference. “Sebi’s direction was a remedial one. But the remedy should compensate shareholders (of Herbertsons) who were denied a chance to sell their shares at a fair price,” SAT said.

The Chabbria group will pay interest — at 15 per cent per annum — from February 24, 1995 to the day it pays for the shares offered in response to the open offer. However, only investors who held shares of Herbertsons on January 25, 1995 will be entitled to this sum.

This is a new twist to the legendary Mallya-Chhabria spat, which many thought had ended with the Sebi order that directed Mallya to divest 8.88 per cent through an open offer to bring down his holding in Herbertsons to 21.38 per cent. Chabbria was required to offload 37.48 per cent to prune his stake to 10 per cent.

The case was fought in Sebi and various courts, including the Supreme Court. Former Sebi chief D. R. Mehta delivered the controversial order on his last day in office.

Unlike the Sebi order that would have sent the Herbertsons share into a tailspin, most lawyers said the tribunal’s order today goes in favour of small investors. Sebi’s order intended to settle allegations that Mallya and Chhabria had fallen foul of the listing agreement and regulations framed in 1994 by amassing shares from the market in excess of 10 per cent — the threshold limit in the takeover code of the time.

Sebi's sledgehammer verdict would have hit both warring sides, but would have been a deathblow to Chabbria’s attempt to mount a hostile take-over bid on Herbertsons. The tribunal has, in a way, revived his hopes.

The Mallya group was asked to bring down the shareholding to 21.38 per cent, held prior to the acquisition, which is 11.38 percent more than Chabbria's permissible stake of 10 per cent in the company.

Chhabria, the estranged brother of Manu Chabbria, joined hands with Mallya, his brother's arch-rival, by merging BDA Distilleries with Herbertsons. Mallya had transferred 27 per cent of his shareholding in Herbertsons to Chabbria in 1993 in a share shuffle that reduced his own stake to 21.38 per cent.

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