Vijay Mallya ke paas Maa hai, but he's in a losing battle at MCF

The battle for takeover of Mangalore Chemicals and Fertilizers (MCF) got a bit more complex this morning after Suraj Poddar’s Adventz Group (parent of the Zuari companies), announced an open offer to acquire about 26 percent stake in the firm at Rs 91.92 a share, a 6 percent premium to last closing price.

Interestingly, Adventz has decided to go it all alone this time, unlike previously, when it had come out with a joint open offer along with MCF’s promoter, Vijay Mallya’s UB Group.

The takeover battle for MCF has been a year and a half in the running, after Pune-based Deepak Fertilizer bought 24 percent stake in the firm, and upped it to 32 percent through a recent open offer priced at Rs 93.6.

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In response, Mallya’s cash-strapped UB, already busy firefighting in other group firms, sought a white knight in the Adventz Group, and together they came out with an open offer at Rs 81.6, and which as expected did not succeed.

Currently, the UB Group holds 22 percent in MCF (though much of it is said to be pledged) while Adventz holds 16 percent. All three firms (MCF, Deepak and Adventz’s Zuari) operate in the fertilizer business.

It remains to be seen how this battle pans out. But it is largely clear that whoever wins, it will likely be Mallya’s UB group that emerges as the loser.

As per terms of the earlier joint open offer of UB-Adventz, Mallya was supposed to continue as MCF chairman for at least five years. But his recent resignation from the company board - and the subsequent appointment of his step-mother Ritu - has put paid to those hopes.

Mallya stepped down from the board a day after a shareholder revolt at United Sprits and after the government turned down his re-appointment as chief of grounded carrier Kingfisher Airlines, still reeling from the “wilful defaulter” tag put on him by the United Bank of India.

Between Adventz and Deepak, both have been rational in the bidding game, increasing their offer prices only incrementally, rather than go for an allout bid.

But even as Deepak is ahead in absolute stake, it appears that Adventz is playing a who-blinks-first game, testing its rival’s patience, perhaps comfortable in the knowledge that if UB throws in the towel and decides to give up control, it would likely hand it over to Mallya’s “good friend” Suraj Poddar of Adventz, instead of Deepak’s Sailesh Mehta, who has looked to seek control in a hostile fashion.

From hereon, Deepak will either decide to tender in their shares and give up the fight; or come out with a competing open offer. If it chooses the latter, it will have to compensate earlier investors with the higher price.