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EconomyBusiness4 ways in which NDTV can avert acquisition by Adani

4 ways in which NDTV can avert acquisition by Adani

Months after world's richest man Elon Musk attempted a hostile takeover of micro-blogging site Twitter, the right-of- crowd in India began rejoicing yesterday on receiving the news that a company of Gautam Adani was taking over the left-leaning media house, New Television Limited. The media house that offers a bouquet of news channels — NDTV 24×7, NDTV India and NDTV Profit, along with their respective websites — has claimed that the 29.18% of NDTV has been acquired without "discussion, consent or notice". this is hardly a rare case in the industry.

However, before recalling previous cases of hostile takeovers, why the NDTV bid by a company of Adani is being viewed as 'hostile' must be understood. Adani initiated a hostile takeover of media giant NDTV with an indirect acquisition of a 29.18% stake in the broadcaster. Then the company offered to buy out a further 26% controlling stake. NDTV said the was converted into without any input from the founders or the company.

This is going to be the Adani group's most high-profile gambit in the media sector where Mukesh Ambani already has a sizeable presence through Network18, which runs a bouquet of channels, including news channel CNNNews18 and business channel CNBCTV18.

Adani Media Ventures Ltd (AMVL), the media arm under the group's flagship Adani Enterprises Ltd (AEL), had in 2021 acquired the digital business news platform Quintillion Business Media Pvt Ltd (QBM).

The development has made the term "hostile takeover" a talking point among business observers in the country. It's called a hostile takeover when a company or an individual tries to take over another company against the wishes of the target company's board of directors or management. When the firm that is targeted refuses to sell, the acquirer employs methods like proxy vote, a tender offer or a large stock. A tender offer is an offer to buy shares from a shareholder of an acquirer business at a higher price than the market price.

A proxy vote is when an acquiring firm persuades current shareholders to vote out the target company's management so that it can be taken over more easily.

In the case of the Adani group versus NDTV management, the former chose to acquire the channels of the latter by purchasing large stocks. 

Hostile takeovers in India before bid of Adani to buy NDTV

There have been several instances of hostile takeovers in Indian corporate history. However, only two such attempts resulted in the change of ownership.

India Cements successfully acquired Raasi Cements in a classic example of a hostile takeover in the Indian business industry resulting in the ultimate acquisition of the traget by a hostile bidder occurred in 1998 when BV Raju sold his 32% stake in Raasi Cements to India Cements.

Larsen and Toubro Ltd (L&T) gained a controlling interest in Mindtree Ltd by raising its stake to 60% in the Bengaluru-based company in 2019. L&T then finished the process of buying the 31% additional stake it targeted to acquire in Mindtree for Rs 4,988.82 crore through an open offer as large investors rushed to sell their holdings.

The 60% stake in Mindtree gave L&T complete control over the software company’s board and management.

The purchase of additional shares through an open offer by L&T after acquiring a 20.4% stake in Mindtree from coffee baron VG Siddhartha and affiliate firms marked the culmination of a year-long effort by the Mumbai-based engineering giant to gain control of Mindtree through a hostile bid.

How a company can prevent a hostile takeover

White Knight: If the management of the target business believes it will not be able to avert a hostile takeover, it can look for a friendlier company to buy a controlling position in the company before the hostile bidder does. For example, in 2001 when stockbroker Radhakishen Damani made an open offer for BAT-controlled VST Industries, ITC entered the fray as a white knight, with support from BAT.
Real estate firm GESCO took the help of Mahindra and Mahindra in 2000 to prevent a hostile bid by Dalmia Group.

Greenmail: Greenmail is a defense in which the target business buys back its own stock from the acquirer at a higher price.

Crown Jewels: The target company reduces its attractiveness to the buyer by selling off its most valuable asset, which may have initially attracted the acquirer. The target firm might use this technique in conjunction with a white knight.

Poison Pills: It is a strategy in which the target firm dilutes its shares to the point where the acquirer cannot gain a controlling position without paying significant costs.

NDTV may attempt any of the four methods above to avoid being bought by Adani, but that does not look like happening.

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