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Case Abstract:

Target Company:

Fame India Limited formerly known as Shringar Cinemas Limited. The Group’s principal activities are to distribute films, exhibit films and operate through a chain of multiplexes. It operates in three segments: Theatrical, Distribution and Others. The Other segment includes programming and management contracts.

Acquirers:

INOX Leisure Limited is the diversification venture of the INOX Group into entertainment and is a subsidiary of Gujarat Flurochemicals Ltd. INOX has traversed its own path by bringing in a professional and service oriented approach to the cinema exhibition sector. With strong financial backing, impeccable track record and strong corporate ethos, INOX has established a strong presence in the cinema exhibition industry in the short span of time.

Sellers:

The sellers i.e. Shroff family belongs to the promoter group of the Target Company. From just three cinema halls, they have made the Fame India as one of the most sought-after theatre chains in the country with around 95 screens across 12 cities along with a strong presence in key markets like Maharasthra, Haryana, West Bengal, Jharkhand, Gujarat and Karnataka.

Triggering event:

On February 3, 2010, Inox Leisure Limited has acquired 1,50,57,751 equity shares constituting 43.28% in Shroff family promoted, Fame India Ltd. at a price of Rs 44 per share through block deal. The transaction is entirely funded by Gujarat Fluorochemicals. Further, on February 5, 2010, the acquirer have acquired 25,07,537 equity shares of Fame India at a price of Rs 50.75 per share representing 7.21% of the issued and paid up capital of the company. This acquisition will create the largest multiplex networks with a total of 55 multiplexes, 204 screens and 57,891 seats.
Inox had earlier bought Calcutta Cine, a Bengal Ambuja Company. This acquisition had given additional nine multiplexes to Inox in West Bengal and Assam.
Further, after the aforesaid deal, the stock prices of both the companies i.e. Fame India and INOX have started moving in the upward direction.

Controversies involved in the Battle
A takeover battle between Fame India and Reliance MediaWorks looks imminent with the latter accusing the multiplex theatre chain of rejecting its higher offer price i.e. Rs.80 a share for the promoter stake in favour of Gujarat Fluro Chemicals-promoted INOX Leisure. The questions are also being raised on why the Shroffs did not ask for a control premium on their shares, which is the general practice when the promoters surrender management control. However, according to the Shroff family, the promoters of Fame India, they have not received any written offer from Reliance Mediaworks.
Further, it is expected that Reliance MediaWorks may approach the Securities and Exchange Board of India as the next step if the issue is not resolved.

Offer Details:

As after the aforesaid acquisition, the total shareholding of Inox in Fame has reached to 50.48% i.e. more than 15%, therefore, it has resulted into triggering regulation 10 of SEBI (SAST) Regulations, 1997 requiring the open offer to be made to the shareholders of the Target Company. Accordingly, on February 06, 2010, INOX has given an open offer to the shareholders of Fame India to acquire 8,231,759 equity shares of Rs. 10/- each representing 20% of the paid up equity capital of Target Company at a price of Re. 51 per share payable in cash.

On February 21, 2010, Reliance MediaWorks has given a counter open offer for 2.16 crore shares or 62.08% stake in the company for Rs 83.40 against the INOX offer for 82.31 lakh shares at a price of Rs 51 per share. As on the date of counter offer Reliance MediaWorks along with Reliance Capital Market (PAC1) and Reliance Capital Limited (PAC2) (Acquirers) holds 42,24,435 Equity Shares representing 12.14% of the equity share capital of Fame India Limited(Target Company).

Vide corrigendum dated March 4, 2010, Reliance MediaWorks Limited (Acquirer) has increased the offer size from 2,16,00,000 to 2,17,00,000 equity shares representing 62.36% of the fully paid up and issued equity capital of the Fame India Limited (Target Company) and 52.72% of the Emerging Equity share capital and voting capital of the Target Company.
The disclosure in the PA had stated that PAC1 held 42,24,435 equity shares of the Target Company as on the date of the PA representing 12.14% of the fully paid up and issued equity share capital of the Target Company. However, after the date of the PA there was a short delivery of 1,10,942 equity shares due to close out of position by the stock exchanges.
Therefore, the actual number of equity shares held by PAC1 as on the date of the PA was 41,13,493 equity shares constituting 11.82% of the fully paid up and issued equity share capital of the Target Company.