News: E*Trade open offer for IL&FS Investsmart

(TT 10/10/2006) Mumbai - The US-based E*Trade Financial Corporation has made an open offer to acquire 20 per cent in IL&FS Investsmart at a price of Rs 210 per share. If the open offer is successful, E*Trade will have close to 48 per cent in Investsmart, making it the largest shareholder in the company.

This open offer follows a proposed conversion of Investsmart’s GDRs into equity shares, which will result in a 27.87 per cent stake for E* Trade.

E*Trade plans to acquire over 1.38 crore shares, which would translate into an outgo of Rs 291 crore.

E*Trade will buy these shares through its indirectly wholly owned subsidiary, E* Trade Mauritius Ltd. It also plans to appoint its senior executives in the management team of Investsmart. E*Trade said the offer would result in a change of control of Investsmart and it was “not subject to any minimum level of acceptance by the shareholders of Investsmart”.

It added that E*Trade Mauritius’s larger stake in Investsmart would help expand the operational partnership between Investsmart and E*Trade Financial to increase global trading and investing opportunities for retail and institutional customers of both the companies.

“The two-way global relationship” is expected to provide Indian investors access to international markets and global customers with greater market opportunities to invest in India.

After the offer, E*Trade Financial resources will be deployed in India, allowing Investsmart to leverage the US firm’s technology.

On June 30, E*Trade held a 7.04 per cent stake in Investsmart, while IL&FS had over 29 per cent. The company says as on date, it holds 11,275,007 global depository receipts (GDRs) issued by Investsmart, of which 7,500,000 GDRs were acquired on December 14, 2005; 105,500 GDRs on July 24, 2006 and 3,669,507 GDRs on August 2, 2006.

Each GDR represents one equity share and they are listed and traded on the Luxembourg Stock Exchange. On July 24, E*Trade Mauritius acquired 3,163,570 equity-linked certificates, under the CLSA Group’s derivatives programme backed by an equivalent number of equity shares of Investsmart, which it added, was owned by a Sebi-registered FII belonging to the CLSA group.

E*Trade said it intended to convert all its GDRs into equity shares. Towards this purpose, it passed a board circular resolution on October 6 to convert the current and prospective holding of 14,438,577 GDRs into equity shares comprising 20.83 per cent of Investsmart’s equity. It was due to this proposed conversion of GDRs that the shareholding would rise to 27.87 per cent, necessitating an open offer.