Bajaj Hindustan's plan to buy Balrampur falls through on payment schedule

The country’s largest sugar company Bajaj Hindusthan’s attempt to acquire its closest rival, Balrampur Chini Mills, for around Rs 2,400 crore has fallen through over differences on the payment schedule.

A person privy to the development said Bajaj Hindusthan proposed that the proceeds should go to Balrampur Chini Mills’ promoters once it receives the market regulator’s go-ahead for the mandatory 20% open offer for minority shareholders. But the Kolkata-based Saraogi family, promoters of Balrampur, wanted to get the proceeds immediately for its 36.5% stake.

Under the existing norms, a buyer can pay the full amount directly to the seller or put it in an escrow account. The seller, however, is not permitted to transfer its shares directly; it has to keep the shares in an escrow account, which can only be transferred after Sebi clears the mandatory 20% open offer. In order to fulfil the formalities of an open offer, the buyer has to keep at least one-fourth of the required money in an escrow account. The buyer also has the option of furnishing a bank guarantee equivalent to the required fund. In that case, it will have to put at least 1% of the open offer consideration in cash. The laws demand a buyer to launch a 20% offer once it buys 15% stake in a company.

The broad contours of the deal, which the parties discussed over the past six days, suggested that Bajaj Hindusthan would buy Saraogi family’s 36.5% stake for Rs 1,700 crore and would launch an open offer for Rs 700 crore. The deal was to be announced this week.

However, the discussions fell through on Monday evening at a meeting between Balrampur Chini Mills managing director Vivek Saraogi and Bajaj Hindusthan joint managing director Kushagra Bajaj, said the source quoted earlier.

If the deal had gone through, Bajaj Hindusthan would have become the world’s second largest maker of the sweetener, after Cosan SA of Brazil, with a capacity of 200,000 tonnes a day. It would have a combined asset of $2.5 billion, a revenue of $1.7 billion, 17,000 employees and Rs 1,500-crore cash flow.