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Mukesh Ambani checks into Oberoi with 14.12% buy
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Wednesday, 01 September, 2010, 08 : 00 AM [IST]
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Our Bureau, Mumbai
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In a surprise move in the ongoing battle for control of East India Hotels (EIH) and its flagship Oberoi properties, Mukesh Ambani's Reliance Industries (RIL) on Monday picked up 14.12 per cent stake (55.4 million shares) in the hotels major. RIL paid Rs 1,021 crore, which is a 22 per cent premium on the company's current market price of Rs 151 a share. RIL bought the stake from EIH promoter P R S Oberoi and two other promoter entities, Oberoi Hotels Pvt. Ltd and Aravali Polymers LLP.
Following this deal, the promoter stake in EIH will come down to 32.41 per cent. The deal upsets cigarette maker ITC's desire to one day control the hotel chain, and ends Max Group chairman Analjit Singh's flirting with the Oberoi's for a substantial stake. ITC also holds a strategic 14.98 per cent stake in EIH. Its presence has long been perceived as hostile by the EIH management.
Expressing full faith in the EIH management, RIL said it would lend its full support and that there would be no change of management, operation or control. However, RIL would try and pick up the minority shares of 12 per cent owned by LIC (6.36%), Analjit Singh's Pivet Finances (2.18%), GIC (1%), among others.
Although ITC CEO Y Deveshwar has often reiterated that his firm would not launch a hostile takeover for the hotel, it's possible that this could turn out to be a fight for veto power in EIH. Should both ITC and RIL pick up more than 15 per cent shares, they would be compelled to make an open offer to minority shareholders. Given that RIL clearly has more financial muscle, it is possible that ITC might give in.
It would appear that the Oberoi family, which is unlikely to sell any more of its 32 per cent stake it holds now after the sale to RIL, would support RIL rather than ITC, which is a business rival. "We are happy to encourage Reliance's investment," P R S Oberoi said in a media statement.
The interest shown by Nita Ambani, the Reliance chairman's wife, in services and education may have led to the investment. She runs Mumbai Indians, an IPL cricket team, and a prominent city school for poor children.
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