Coromandel Fertilisers acquires 56.28 % stake in Liberty Phosphates

After buying a 56.28-per cent stake in Liberty Phosphate, Coromandel International has made an open offer to acquire an additional 26 per cent.

However after announcement of the deal and quarterly results, the share price of Coromandel International fell about 7 per cent in morning trades.

According to investment advisor SP Tulsian, the fall in the share price was due to poor results posted by Coromandel International. He added, however, that the acquisition was excellent and valuation at which the company had bought was reasonable.

According to analysts, considering valuations and synergies, the deal should be positive for Coromandel International and for instance at Rs241 a share, value of Coromandel International's stake worked out to Rs196 crore while that of Liberty Phosphate worked out to Rs348 crore as against its current market capitalisation of Rs308 crore.

This was also one reason considering the gap in valuations that the share price of Liberty Phosphate had risen in the morning trades by 3.43 per cent. Importantly, Coromandel International had also made an open offer for a further 26-per cent stake in Liberty Phosphate at Rs241 a share, which meant a further upside for Liberty Phosphate as a result demand for shares.

At the said price Liberty Phosphate was valued 0.7 times its FY12 sales and 3.6 times its operating profits which was considered to be reasonable, however on the basis on the book value to market cap the valuation worked out to 2.4 times.