Asia's richest man Adani launched a hostile takeover of media giant NDTV, first with an indirect acquisition of a 29.18% stake in the broadcaster followed by an offer to buy out a further 26% controlling stake. NDTV said the debt was converted into equity without any input from the founders or the company.
This will be the ports-to-energy group's most high-profile bet in the media sector where Mukesh Ambani already has a sizeable presence through Network18, which runs a bouquet of channels, including news channel CNN-News18 and business channel CNBC-TV18.
Last year, Adani Media Ventures Ltd (AMVL), the media arm under the group's flagship Adani Enterprises Ltd (AEL), had acquired the digital business news platform Quintillion Business Media Pvt Ltd (QBM).
The news has again put a spotlight on the topic of "hostile takeover" in the Indian corporate industry.
So what exactly is "hostile takeover"?
A hostile takeover occurs when a company or a person attempts to take over another company against the wishes of the target company's board/management. That is the "hostile" aspect of the hostile takeover- merging with or acquiring a company without the consent of that company's board of directors.
How a hostile takeover is done?
Let's say company 'A' submits a bid offer to purchase company 'B'. And, company 'B' rejects the offer, saying it to not be in the best interest of shareholders.
However, company 'A' attempts to force the deal through various methods: a proxy vote, a tender offer, or a large stock. A tender offer is an offer to buy shares from a shareholder of an acquirer business at a higher price than the market price.
A proxy vote is when an acquiring firm persuades current shareholders to vote out the target company's management so that it can be taken over more easily.
In Adani Group vs NDTV's case, the former chose to acquire the channel by purchasing large stocks.
Hostile takeover cases in India
There have been several instances of hostile takeovers in Indian corporate history. However, only two such attempts resulted in the change of ownership.
India Cements successfully takeover Raasi Cements
This is one of the classic examples of a hostile takeover in the Indian business industry resulting in the ultimate acquisition of the traget by a hostile bidder occurred in 1998 when BV Raju sold his 32% stake in Raasi Cements to India Cements.
L&T and Mindtree acquisition
This was the second successful takeover after India Cement's successful takeover of Raasi Cement.
Larsen and Toubro Ltd (L&T) gained a controlling interest in Mindtree Ltd, raising its stake to 60% in the Bengaluru-based company in 2019.
L&T completed buying the 31% additional stake it targeted to acquire in Mindtree for ₹4,988.82 crore through an open offer as large investors rushed to sell their holdings.
The 60% stake in Mindtree gives L&T complete control over the software company’s board and management.
The purchase of additional shares through an open offer by L&T after acquiring a 20.4% stake in Mindtree from coffee baron VG Siddhartha and affiliate firms marked the culmination of a year-long effort by the Mumbai-based engineering giant to gain control of Mindtree through a hostile bid.
How a company can prevent a hostile takeover?
- The white Knight: If the target business's board believes it won't be able to avert a hostile takeover, it can look for a friendlier company to buy a controlling position in the company before the hostile bidder does. For example, in 2001 when stockbroker Radhakishen Damani made an open offer for BAT-controlled VST Industries, ITC entered the fray as a white knight, with support from BAT.
Real estate firm GESCO took the help of Mahindra and Mahindra in 2000 to prevent a hostile bid by Dalmia Group.
- Greenmail: Greenmail is a defense in which the target business buys back its own stock from the acquirer at a higher price.
- Crown Jewels: The target company reduces its attractiveness to the buyer by selling off its most valuable asset, which may have initially attracted the acquirer. The target firm might use this technique in conjunction with a white knight.
- Poison Pills: It is a strategy in which the target firm dilutes its shares to the point where the acquirer cannot gain a controlling position without paying significant costs.
