Conagra's agro tech stake sale at discount raises eyebrows
Conagra Brands' sale of a 51.8% stake in Agro Tech Foods at a 48% discount to the market price and the subsequent mandatory open offer at a 43% discount to Thursday's closing price have raised eyebrows on Dalal Street. Market participants were surprised by this move, likening the decision to suggest that certain midcap stocks are either significantly overvalued or face underlying hidden challenges.
On Thursday, Conagra announced the sale of a 51.8% stake in Agro Tech at ₹515 per share, despite the market price being above ₹1,000 apiece. The mandatory open offer of 26% to the public shareholders was set at ₹578 apiece, representing a discount of 43% from Thursday's closing price and a discount of 17% from the average price of the stock over the past year. The stock locked in a 20% lower circuit on Friday to close at ₹804.15.
«Typically, when a controlling stake is sold, it commands a premium over the market price,» said Vinay Chauhan, a practising counsel on corporate matters. «However, if the controlling stake is sold at a significant discount to the market price on the exchanges, the same could be indicative of distress sale or some business concerns within the company that are not publicly known or that the price prevalent in the markets is artificially inflated.»
The stock's 52-week high was ₹1,089 with the low at ₹741.50. Over the course of one year, the average stock price stood at ₹838, while the six-month average hovered around ₹845.
Convergent Finance LLP and private equity firm Samara Capital will
