United Bank seeks to block Mallya-Poddar bid to hike MCF stake

The United Bank of India (UBI) has written to Securities & Exchange Board of India (Sebi) asking it to reconsider its approval of the joint open offer by Vijay Mallya's United Breweries and Suraj Poddar's Zuari Group to acquire additional shares in Mangalore Chemical and Fertilisers (MCF).

According to a report in the Business Standard citing persons privy to the development, the bank has asked the regulator to reconsider the approval as it has identified Mallya's failed airline Kingfisher as a 'wilful defaulter' – a move which Mallya has reportedly challenged.

UBI is one of the lenders to the Mallya's now-grounded airlines, which has been reeling under a Rs6,500-crore debt burden.

According to RBI rules, a 'wilful defaulter' is someone who has the capacity to pay back their dues but does not do so.

The UB-Zuari joint-open offer is the culmination of a three-way battle for control of MCF between UB, Zuari and Shailesh Mehta's Deepak Fertilisers.

Zuari owns about a 16 per cent stake in MCF, Mallya's UB Group owns about 22 per cent (though most of these shares are pledged to lenders), while Deepak owns a little over 25 per cent, requiring it to make an open offer. All three firms operate in the fertiliser business.

Following Mallya's Kingfisher woes, Deepak went in for a hostile takeover of MCF, and after slowly inching up its stake beyond the 25 per cent threshold, it declared the mandatory open offer to acquire another 26 per cent in the firm for Rs63 per share (See: Deepak Fertilisers to make open offer for 26% stake of Mangalore Chemicals).

After this, Mallya teamed up with Poddar and they declared a joint open offer that trumped Deepak's by Rs5.5 (at Rs68.5).

In July Sebi approved the open offer by  Zuari Agro Chemicals and the UB Group for (MCF), giving beleaguered industrialist Vijay Mallya, whose firm was under a hostile takeover attempt by rival Deepak Fertilisers, some respite (See: Sebi clears Zuari Fertilisers-UB Group joint bid for Mangalore Chemicals). 

Reports say as per the agreement between the two, if the joint open offer goes through, Mallya will have a significant say in how operations are run at MCF.

If Sebi rescinds permission for the joint open offer on the basis of UBI's complaint, it would result in a further setback for Mallya, whose UB Group has already been displaced as the largest shareholder in United Spirits and United Breweries.

Apart from Sebi's approval, Deepak's open offer has also got approval from the Competition Commission of India while the UB-Zuari joint open offer is yet to do so.

Recently, there were reports Deepak was considering backing off from the heated control battle – now into its second year – and was unlikely to bump up its offer price beyond what UB-Zuari were willing to pay for MCF shares.

But the latest development could come in as a shot in the arm for the Pune-based fertilizer firm.