Minority shareholders oppose HP bid to delist Digital

Wednesday, 07 January 2004, 20:30 IST
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BANGALORE: The majority of Digital GlobalSoft shareholders Wednesday opposed the company's de-listing ahead of parent Hewlett Packard Ltd acquiring 100 percent control complaining they were being short-changed. At a stormy three-hour extraordinary general meeting here, shareholders accused the company of betraying them and throwing them out with a pittance though they stood by it since its inception 18 years ago. Most of the minority shareholders said Digital was denying them the fruits of its success by offering to buy them out for what they described as a measly 750 per share. US-based Hewlett-Packard (HP) Ltd, which holds 51 percent of Digital's shares through its wholly owned subsidiary, Compaq Computer Holdings Ltd, has offered to buy out the remaining 49 percent at an offer price of 750 a share. For this, the company would have to de-list from Indian stock exchanges in conformity with the guidelines of the Securities and Exchange Board of India (SEBI). Since HP is a majority shareholder in Digital, the former had said the objective of getting Digital de-listed was part of its strategy to integrate it with the US tech major's worldwide group operations. Institutional investors as well as retail shareholders hold 49 percent stake in Digital. Out of this, foreign institutional investors hold 20.41 percent, while Indian institutions own 15.34 percent. The public holding is around 13.35 percent. In view of the strong resentment to the resolution from majority of 333 shareholders present at the meeting, Digital chairman Peter Mercury, who presided over the meeting, was forced to call for a ballot vote. Company secretary and chief financial officer N.V.P. Tendulkar told IANS that the results of the voting would be declared by Thursday though the company had legally 48-hours period to announce the outcome. "Since the resolution could not be put to voice vote by raise of hands, we have given the option of voting to the shareholders present at the meeting," said Tendulkar. Before the voting was taken up, HP board member Lidforss Hans told the shareholders that the proposed de-listing would take place through the reverse book building process that would be kept open for tendering the shares from January 19-23. "After the five-day book-building process, the company will decide on January 24 whether to go ahead with its de-listing at the final price to be determined on the basis of the offer price tendered by the majority shareholders," Hans declared. The company also informed the shareholders that a detailed offer letter would be dispatched to them in a couple of days with procedures and explanations on how to tender their shares. According to analysts, the proposed de-listing of Digital from Indian stock exchanges at the offer price of 750 is a fait accompli in view of Compaq Computer holding majority shares with 50.58 percent. "Once the institutional investors tender their shares at the offer price through the reverse book-building process, the company will have the required mandatory or majority shares at the final price to go through the exercise," an analyst stated. At the same time, the company has offered to keep the books open for another six months for those shareholders who decide not to tender their shares during the five-day offer starting January 19. The company has fixed the offer or exit price of 750 per share by fixing the floor price at 500 and enhancing it with a 50 percent premium, taking the average price of the shares quoted on the stock exchanges for 26 weeks prior to November 30, 2003. Since then, however, the appreciation of the Digital share price in a booming market has reduced the premium to 32 percent currently. The scrip was quoted at 742 on the Bombay Stock Exchange at the end of Tuesday's trading. Taking strong exception to the resolution, shareholder Alex Rebello said the company's attempt to de-list its shares was suicidal to minority shareholders. "These multinationals will throw us out with a pittance to carry away our wealth in the name of globalisation," he said. "With this fatal move, we are being denied the benefits of its strong growth prospects in terms of dividends and capital appreciation." Voicing the anguish of the minority shareholders, Rebello said the least the company could do to loyal and long standing shareholders was to enhance the offer price and give a generous dividend as a parting gift. "We will vote against this resolution as it amounts to signing our death warrant and denial to sharing the wealth generated by the company with our hard-earned investments over 18 years," Rebello said.
Source: IANS