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Hostile buyers beware

When the Choksey dynasty sold its stake in India's leading paint company, it unleashed a drama fit for a Bollywood movie, embroiling foreign securities firms and a UK multinational in a tale of intrigue, betrayal and family feuding. Steven Irvine reports on India's first hostile takeover bid.

It is a battle between old India and new - between a fiercely nationalist old guard and reformists who want to throw open India to foreign investment. It involves a well-run family business called Asian Paints which for most of the summer has been at the centre of controversy. The country's largest paints company is vocally resisting the attentions of UK-based multinational ICI, which has purchased a 9.1% stake in the company.

With its impish mascot Gattu, a young Indian boy holding a paintbrush, the company is a source of national pride. Meanwhile ICI's association with the British empire raises the spectre of India's colonial past.

Already, reputations have been smeared, contracts annulled, and incredible assertions made. Thanks to Indian law, ICI's stake in Asian Paints is locked in a peculiarly Indian limbo; by comparison, western poison pills look mild. The situation is proving a test case for India's fledgling takeover code, and will set precedents that everyone, including the government, is aware will have far-reaching consequences. It looks almost certain that hostile takeovers by foreign businesses will remain strictly off-limits.

The Bombay Club, an influential but informal group of Indian businessmen, says ICI should quit its takeover campaign.

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