Is the hostile takeover of Hindalco unthinkable?

A number of companies were in the fray for Canada-based Alcan. US aluminium giant Alcoa had offered USD 73.25 per share for Alcan on May 7. On May 23, Alcan rejected the USD 27.6 billion takeover bid from Alcoa, which could have created the world's largest aluminium company. Hindalco was rumoured to be in talks with global mining giant BHP Billiton for a joint bid, while Sterlite was supposed to be bidding with Rio Tinto. The story now takes a U turn.

Now, there are reports that Canadian company Alcan may team up with Sterlite for a hostile takeover bid for Hindalco. The A V Birla Group holds only 27% stake in Hindalco. FIIs and institutions hold 20% and 12% respectively. About 10% is in GDRs while the remaining is with retail investors, which is a fairly large free-float. To raise money for its Novellis takeover, Hindalco had also made a preferential allotment of 14.75 million warrants and shares in April, which would take the promoter holding to about 35%.

Sterlite has always been trying to increase its market share in India. It plans to become the No.1 aluminium player in the country and this is one factor, which the Anil Aggarwal Group will be looking at.

In case Alcan makes a bid for Hindalco it will make it highly unattractive for other players, as it will be embroiled in quite a hostile bid unless the Aditya Birla Group is willing to sell. Do analysts see this deal going through? Most analysts CNBC-TV18 spoke to say they do not foresee the deal going through, as it was an Aditya Birla undertaking and taking over a company of this size and stature would be very difficult.

Post-media reports that Sterlite and Alcan may acquire stake in Hindalco, the Hindalco stock rose to its three-month high.

Portfolio Manager P N Vijay said a hostile takeover of Hindalco is unthinkable. 'Out of the question. I don't think too many people can buy off a blue blood Birla company in this country. The Birlas won't turn away. The Birlas and Tatas are all institutions in this country and I think NRIs and multinationals stand in the queue. It is out of the question. If the young Birla wants to sell Hindalco then that's a different matter. But a hostile takeover of Hindalco is unthinkable,' he added.

Jagdish Malkani, Member, NSE, feels its stocks looking for stories. 'I think it is stocks looking for stories. I find this a bit of a stretch of the imagination. To have a Kumar Birla company out there being really picked out etc, I don't think the Indian market is ready yet. If anything, they themselves could be averaging some stake. There is a lesson in it that just like Tata Steel. These are very valuable companies and the promoters want to beef up their stake as much as they can till they get to that elusive 51%. May be it is some of their own buying. But I wouldn't put too much credence to it,' he added.