Who Will 'Check-In' to Oberoi - RIL or ITC??

1 Pages Posted: 2 Feb 2011

Date Written: August 30, 2010

Abstract

Reliance Industries Limited (RIL) has made an acquisition of 14.12% stake in EIH (Eastern India Hotels) Limited for about Rs 1021 Crores. At this valuation, the deal price works out to at Rs 184 per share of EIH.

This transaction is significant, because ITC is holding about 14.98% stake in EIH Limited, and it is widely anticipated that ITC may be looking to make a hostile takeover bid on EIH Limited.

By bringing in RIL as a 14.12% stake owner, it may become difficult for ITC to make any takeover attempts of EIH. This is an internationally widely followed M&A strategy termed "White Knight", wherein the target company brings in a new acquirer, to keep a potential acquirer away from taking it over. Here, RIL is a perfect "White Knight" for EIH.

Either ways, the ultimate beneficiaries of the scene would be the minority shareholders of EIH, because the competition between RIL and ITC may lead to strong prices being offered for EIH.

Keywords: India, Indian financial markets, Indian capital markets, M&A, merger, acquisition, hospitality, Oberoi, EIH, East India Hotels, Reliance, RIL, ITC, open offer, takeover, buyout, SEBI, White Knight, minority shareholders,

Suggested Citation

Thunuguntla, Jagannadham, Who Will 'Check-In' to Oberoi - RIL or ITC?? (August 30, 2010). Available at SSRN: https://ssrn.com/abstract=1752107 or http://dx.doi.org/10.2139/ssrn.1752107

Jagannadham Thunuguntla (Contact Author)

affiliation not provided to SSRN ( email )

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