NEW DELHI: US-based hedge fund DE Shaw and the Maheshwari family, that owns Amar Ujala newspaper, are engaged in a spat over the fate of the hedge fund’s 18% stake in the company. In October 2010, exercising its right under the shareholders agreement, DE Shaw had asked the Indian promoters to either buy back its entire holding or sell their entire 82% stake to a third party along with the hedge fund’s stake, as per documents in ET’s possession.
Following the Maheshwari family’s refusal to buy back the shares, DE Shaw approached Delhi high court last month seeking an injunction restraining Indian promoters from selling or pledging their controlling stake. “a¦the controlling shareholders are disputing and refusing to discharge their obligations under the transaction document,” DE Shaw said in its petition.
“Such an action by DE Shaw clearly reflects the arm-twisting tactics to put pressure on us. We will follow the law at all costs to address the matter whatever means they resort to,” said an Amar Ujala spokesperson. Amar Ujala runs a daily Hindi newspaper under its own name. An e-mail sent to DE Shaw’s India head Anil Chawla went unanswered.
The hedge fund, which globally manages a portfolio of $19 billion, had picked up an 18% stake in Amar Ujala in 2007 for 117 crore. Under the agreement, the company was to provide an exit route to DE Shaw through a public issue by September 2010, claims the hedge fund in its petition. Alternatively, Amar Ujala had to buy back DE Shaw’s stake in the firm at a price that ensured 25% rate of interest compounded annually, says the petition.
Since Amar Ujala failed to do the public issue, DE Shaw had issued a notice in October 2010 for buying back its 18% stake at a pre-determined price that gave an assured return of 25% compounded annually, amounting to over 225 crore.
According to the DE Shaw petition, it has ‘drag rights’ over the 82% held by the local partner if the IPO did not take place or the Indian promoter did not buy its shares at the pre-determined price. These ‘drag rights’ in effect make it mandatory for the Indian promoter to sell their shares along with D E Shaw to the buyer selected by the hedge fund.
As neither of these two developments have happened, DE Shaw is trying to exercise its “drag rights” over the promoter holding and has asked the promoters to deposit their entire stake in an escrow account, which they refused. Consequently, DE Shaw approached the Delhi high court. साभार : The Economic Times