[Investors] Bharati Shipyard (BSL) and ABG Shipyard (ABGS) to acquire Great Offshore (GOL) entering the final lap

Light at the end of tunnel - battle to acquire Great Offshore

Finally, there is light at the end of tunnel - with the battle amongst Bharati Shipyard (BSL) and ABG Shipyard (ABGS) to acquire Great Offshore (GOL) entering the final lap. Due to SEBI's intervention, the bidding war was put under screener and process was temporary halted. But, it is expected that, SEBI will give its go-ahead to launch open offers to the shareholders of GOL- with process to begin in early-December-2009. Just to recall, ABGS last open offer price for 25% of equity share capital of GOL stands at Rs506/Share and BSL last open offer price for 20% of equity share capital of GOL stands at Rs560/Share. As per SEBI regulation, the bidders have option to revise open offer price within 10 days of the launch of open offer, which itself is open for 20 days. Considering the aggressive bidding in recent past to gain control of GOL, December-2009 could witness a fierce battle, yet again. As per back-of-envelope calculation, GOL acquisition likely to become earnings neutral at Rs650/Share of GOL for ABGS and Rs900/Share of GOL for BSL- considering leverage buy-out for both suitors. In a nutshell, every increase in open-offer price will reduce short-term attractiveness to suitors and will benefit the minority shareholders of GOL. We reiterate our view that- BSL has better chance to acquire control of GOL considering its 23% shareholding against 8% shareholding of ABGS- hence ascribed value of GOL to the target value of BSL.

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