Pipavav Def loses as Anil Ambani takes over

Pipavav Defence deal took everyone by complete surprise. It was a well know secret that stake sale was inevitable but no one had expected that it would be Reliance Infra to step in. The Anil Ambani group company acquired Pipavav with complete management control.

As per the deal, Reliance Infra will acquire 13 crore shares or 18% stake from the promoters at Rs.63/share, taking the total bill of purchase to Rs.819 crore.

This has triggered off an open offer from Reliance Defence Systems, a subsidiary of Reliance Infrastructure to acquire 26% shares from the public shareholders of the company, at a price of Rs.66/share. Reliance will also acquire from them such number of additional equity shares of the Company, at the same price of Rs.63/share, as is required to ensure that Reliance’s shareholding is not less than 25.10% of the Target Company, after taking into account the acquisitions made under the Open Offer.

Post the transaction, the existing promoters of Pipavav Defence will continue to retain a minority stake in the company, together with two non-executive Board seats. Anil D. Ambani, will become the Chairman of the Company, which is intended to be renamed as Reliance Defence Limited.

Though the market is miffed at the moment with the stock being the top loser on the BSE, down 10% on the lower circuit of Rs.68.85, This buy, many on the street say will prove to be beneficial over the next 2-3 years as Pipavav as such was stagnating on growth with almost all money earned being used to pay off interest on its debt of Rs.7000 crore.