THE CURIOUS CASE OF ASTRAZENECA PHARMA DELISTING

By Ruma Dubey

Finally, SEBI smelt the rat in Astrazeneca Pharma delisting offer. The way the company, that too an MNC has been conducting itself in this entire delisting process had raised a stink long time ago.

First the story of its delisting this year – let us untangle this mess from the end to the beginning. On 4th March, the stock price of the company spurted to a new 52-week high after the company announced its delisting plans. But then on 5th March, it announced that it had decided to defer the delisting plan and seek more details on the deal from the parent company.

Then again on 13th March, it issued a statement that its Board will be meeting on 15th March to once again consider the delisting proposal. The Board approved the plan and another Board meeting was called on 15th April, to seek approval of the shareholders for the delisting. On 15th April, the company issued a statement saying that the Board has deferred consideration of seeking approval of shareholders.

It gets murkier; on 2nd May, the company stated once again that it had called a Board meeting on 5th May that it has sought shareholders approval once again for the delisting through the postal ballot. And then on 20th June, the company announced that it had got the approval.

Throughout this, almost everyone knew that things were not right; it reeked of major corporate governance violation. The company had previously tried to delist the stock, first in 2004 and then in 2010. In 2010, it had fixed a floor price of Rs.576.10 and set a maximum acceptable price of Rs.1,152 but shareholders did not vote in favour of the resolution through postal ballot. One had lost hopes of this stock delisting after the promoters in March 2013 decided to trim the promoter’s stake from 89.99% to 75%, keeping in line with SEBI’s stipulation of bringing down promoters stake to 75%. And now once again, it made a decision to delist, that too after so many deferments.  

SEBI has found out today what everyone knew long time ago – its parent had earlier sold its 15.5% stake to a cluster of 4 FIIs, all P-Note holders and now it has announced delisting. SEBI found that 94.02% of shares offered through the Offer-for-sale (OFS) were allocated to four entities which were sub-accounts and participatory notes of a SEBI registered FII- Elliott Advisors (HK) Ltd. SEBI has found that the OFS floor price was at significant discount to prevailing market price – Rs.490/share far below the previous day's closing price of Rs. 805.3. This made it easier for the Elliott group to mop up all the shares at an average price of Rs.625.35/share – lower that previous day’s close price of Rs.179.95 but much higher than the floor price.

Elliott group came in like a wave from nowhere, bidding in a synchronized manner, making final bid modifications just a few seconds before market closure.  The big obvious question – why delist again when promoters stake was trimmed to 75%? Simple answer – the delisting could not go through twice earlier and now for the third time, it felt that it was better to trim the stake when you knew that delisting was going to be a sure shot success – what with favourable 100% voting coming from the Elliott group.

The shareholder approval statistics itself shows that the Elliott group and other FIIs rule the roost – of the total 461 shareholders, 330 shareholders voted against while 131 shareholders voted for. Simple math shows that majority wins but here, though shareholders ‘against’ were more, they held just 13.47% of the shares while the rest held 86.53%. Thus in the same vein, for the delisting, the Elliott group with their current shareholding of 15.52% will ensure delisting goes through; retail investors not required at all! After all, retail investor’s stake is just 8.89%.

If this is not gross corporate governance violation, what else is?  SEBI has now asked BSE and NSE to closely monitor the entire delisting process of AstraZeneca Pharma and allow the final delisting of its shares only after satisfying themselves that the process has been fair and transparent. The exchanges have been asked to promptly report aberrations in the delisting process. SEBI further directed that the promoters of Astrazeneca shall finally purchase shares from public shareholders in the delisting offer only after seeking approval of the BSE and the NSE.

Well, it’s a straight case of fraudulence; we Indian’s are too tolerant. So we will tolerate this ‘soft’ approach of SEBI and hope it stems this case of straight cheating, right here and right now. It could not do anything in the case of Fresenius Kabi – it too had parked its shares with FIIs after which they decided on the indicative price, which was the discovered price for delisting.

Moot point here – just as all that which glitters is not gold, not every MNC is the gold class we assume it to be!