CG Power & Industrial Solutions’ lenders were left disappointed as no suitors came forward to submit counter bids for the company as the deadline ended late Wednesday evening.
Two people directly involved in the matter said that Murugappa Group-led Tube Investments remained the sole bidder, with no new suitors coming forward under the Swiss Challenge method.
With the Murugappa-led Tube Investment offer translating to a low recovery of under 46 percent, lenders had hoped they would get better offers through the open bidding process, said a senior banking executive with exposure to the company.
Earlier this month, lenders to CG Power asked potential suitors to come forward to better an offer made by Tube Investments to acquire the company. Lenders proposed to conduct the sale via the Swiss Challenge Method which is an open bid process favouring the highest offer. As per the conditions of this method, Tube Investments would still be offered a chance to better the highest offer on the table.
On August 8, CG Power had informed exchanges of the offer received from Tube Investments. CG power said its board "considered and approved the execution of a securities subscription agreement with Tube Investments of India Limited ("Prospective Investor") dated 7 August 2020 ("SSA") for the issuance and allotment of following securities to the Prospective Investor on a preferential basis ("Preferential Allotment") inter alia subject to the fulfillment of the conditions precedent set out in the SSA."
As per the securities subscription agreement, Tube Investments would buy 64.24 billion shares at Rs 8.56 each for a total of Rs 550 crore to take a 50.62 percent stake in the company.
"Banks are in the process of taking individual board approvals and will meet on August 28 to take the final call," said a person in the know.
"There are three components to Tube Investment’s offer, they are not paying everything upfront. Rs 650 crore is the cash component and about Rs 200 crore would be in the form of NCDs (non convertible debentures) and another Rs 150 crore through a property deal,” said another person involved in the matter.
With no other offers, banks may have little choice but to accept the offer from Tube Investments, opined a bank executive.
The company ran into trouble last year when its board discovered large accounting irregularities. Its chairman Gautam Thapar was subsequently forced to leave.
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CG Power has a debt of around Rs 2,500 crore to an SBI-led consortium of lenders which includes ICICI Bank, Axis Bank, IDBI Bank, Corporation Bank, and Canara Bank.