‘Hostile Takeover’: How Adani Group Acquired Stake In NDTV | EXPLAINED

On Tuesday, Adani Group said that it had acquired VCPL and exercised those rights, which should give it the 29.18 per cent stake

Gautam Adani-led Adani Group’s media arm on Tuesday said that it will acquire a 29.18 per cent stake in New Delhi Television Ltd (NDTV). The comglomerate said that the acquisition of 29.18 per cent stake in the media house will be indirect and will be made through Vishvapradhan Commercial Pvt Ltd (VCPL), a wholly-owned subsidiary of AMG Media Network Ltd (AMNL), owned by Adani Enterprises Ltd (AEL). The approach the Adani Group took in executing the deal drew most attention in the news industry. Here is how Adani Group went about its planning for the acquisition of NDTV as reported by Reuters.

A short history about VCPL

Vishvapradhan Commercial Private Limited or VCPL, which was set up in 2008, was at the heart of Adani Group’s two-stage plan to snap up a majority stake in NDTV.

NDTV founders Radhika and Prannoy Roy took a Rs 400-crore loan from VCPL over a decade ago and in exchange issued warrants that allowed the firm to acquire a 29.18 per cent stake in the news group. Those warrants were convertible at any time.

On Tuesday, Adani Group said that it had acquired VCPL and exercised those rights, which should give it the 29.18 per cent stake.

NDTV said it has been given two days to transfer all the shares to the now Adani Group-owned VCPL. However, the media house said in a regulatory statement that Adani Group’s takeover bid is without their consent.

“Without any discussion with New Delhi Television Limited (NDTV) or its founder-promoters, a notice has been served upon them by Vishvapradhan Commercial Private Limited (VCPL), stating that it (VCPL) has exercised its rights to acquire 99.50 per cent control of RRPR Holding Private Limited (RRPRH), the promoter-owned Company that owns 29.18 per cent of NDTV. The NDTV founders and the Company would like to make it clear that this exercise of rights by VCPL was executed without any input from, conversation with, or consent of the NDTV founders, who, like NDTV, have been made aware of this exercise of rights only today. RRPRH, which owns 29.18 per cent of NDTV, has been told to transfer within two days all its equity shares to VCPL,” NDTV said.

The memo further mentioned that NDTV was “in the process of evaluating next steps, many of which involve regulatory and legal processes,” without elaborating further.

However, according to some analysts this takeover could also be termed as ‘hostile takeover’.

What is hostile takeover?

A hostile takeover occurs when a firm or a person tries to acquire another company against the wishes of the target company’s board/management or without the consent of that company’s board of directors. This is called hostile takeover.

However, IANS in a report said that a Securities and Appelate Tribunal (SAT) has held that the loan agreement executed by the NDTV promoters with VCPL did not transfer control of NDTV to VCPL either directly or indirectly and, therefore, the findings given by the AO on the issue that the loan agreement is structured in such a way that in fact it transfers control to VCPL indirectly cannot be sustained. 

Regulator guidelines

According to Sebi guidelines, Adani Group’s indirect control over a stake above 25 per cent means it must put forward an open offer to purchase at least 26 per cent more from existing shareholders to give them an opportunity to exit.

According to Reuters, the Adani Group, while chalking out its plan, said the open offer will be at Rs 294 per NDTV share for a total consideration of up to Rs 493 crore. At the full take-up, this would give it 55.18 per cent of the popular news network.

The price was at an unusual 20.5 per cent discount to NDTV’s close of Rs 369.75, though shares had soared in the last month.

Divestment talks for promoters

NDTV in a stock exchange filing said that the day before Adani Group’s plans became public, the Roy founders were not in talks with any entity for a change in ownership or a divestment of their stake in NDTV.

If the Adani Group deal succeeds, the founding duo will hold around 32 per cent of NDTV, the internal memo stated.

Next step for NDTV

Although NDTV has said the move was without its consent, four lawyers who spoke to Reuters on Wednesday said that Adani Group is well within its legal rights in the deal process so far. According to the lawyers, NDTV has limited options.

The promoters could try to stall Adani Group's bid by alleging breach of contract and approach a court for relief, said one law firm partner specialising in M&A transactions, while another lawyer said NDTV should have seen this coming as its founders had issued warrants to VCPL years ago and there was always a possibility a company could execute them to acquire a stake.

Another option would be for Roys to make their own open offer at a much higher price to try to increase their stake in the company.