How Maran clinched the deal

New Delhi: There are few deals where the buyer and the seller both walk away happy. The SpiceJet deal is one, where each side had a price point for reference.
There were two pivots which formed the basis for negotiations. SpiceJet had a dispersed shareholding, with no dominant controller but a holder of foreign currency convertible bonds (FCCBs) who controlled a large chunk of the equity (30 per cent). A key driver for the deal was that W L Ross (WLR), the largest bond-holder, had to either redeem or convert the shares before November 11 this year.
If he had decided not to covert the bonds, and redeem these, he would have realised a value equivalent to Rs 35. Instead, if he had to capture the market price, he would have had to convert the bonds into shares, which would have triggered the open offer rule.
The second aspect of the deal was that Ross had a partner in Istithmar PJSC, which had decided to go its own way in February, and sell its stake to Indian mutual funds. On the one hand, this created a supply overhang and helped the buyer’s cause. And, it also meant that if someone acquired just WLR’s stake, he wouldn’t acquire control of the company.
“From day one, we knew there will be a good deal available. From Ross’ perspective, if someone gave him a reasonable price higher than his opportunity cost (Rs 35), he would be pleased,” said a negotiator. It proved to be a win-win deal for both sides.
13/06/10 Business Standard

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Categories: New Jun 2010, SpiceJet Jun 2010