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Hostile predator prowls the subcontinent

A wakeup call is hardly ever welcome. Core shareholders of Indian companies are being jolted awake by a hostile predator, a rare event in corporate India. In October, Renaissance Estates, a Delhi-based company owned by Abhishek Dalmia, made an open offer to buy Gesco, a property company owned by the Sheths, a prominent industrialist family with interests in the shipping business. Dalmia had bought up just over 10% of Gesco's shares in the market, and bid for another 45% to gain control from the Sheths who own around 13%.

Dalmia's move was well timed. Gesco was demerged from the Sheths' family businesses early this year. Minority shareholders were hardly rewarded as Gesco's shares traded at around Rs10 ($0.21), around a fifth of their book value. Dalmia offered them Rs27 for each share. At that price, Dalmia would have to fork out Rs300 million to gain control of Gesco.

His pay-off? Gesco owned valuable property worth Rs1.2 billion and had Rs300 million in cash. Says TV Raghunath, vice president at Kotak Capital Company, who is advising the Sheths: "It [Gesco] is an asset stripper's dream."

In November the Sheths made a counter-offer to buy up 33% of Gesco's shares at a price of Rs36 along with the Mahindras, another prominent industrialist family that has a property business.