The news of Gautam Adani, the big business tycoon taking over New Delhi Television Ltd (NDTV) news has come as a big shock for the viewers calling it a “hostile takeover.”
It is because, the channel has claimed that the 29.18% of NDTV was acquired without any “discussion, or consent or notice.”
Firstly Adani made an indirect acquisition of a 29.18% stake in the broadcasting company, followed by an offer to buy out a further 26% controlling stake. NDTV claimed the debt was converted into equity without input from the company.
It will be the most high-profile bet in the media sector where Mukesh Ambani already has a visible presence through Network18, which runs a group of channels, including news channel CNN-News18 and business channel CNBC-TV18.
Previous year, Adani Media Ventures Ltd (AMVL), the media group under the flagship of Adani Enterprises Ltd (AEL), acquired the digital business news platform Quintillion Business Media Pvt Ltd (QBM).
The news became a spotlight on the topic of a “hostile takeover” in the Indian corporate industry.
What exactly is a Hostile takeover?
A hostile takeover occurs when any company or any person attempts to take over another company against the wishes of the target board/management. That is the ‘hostile’ aspect of the hostile takeover, Acquiring a company without the consent of that company’s board of directors.
How does a hostile takeover done?
Say, company ‘X’ submits a bid offer to purchase/buy company ‘Y’. And, company ‘Y’ rejects the offer saying it to not be in the best interest of shareholders.
However, company ‘X’ attempts to force the deal through miscellaneous methods: a representative vote, a tender proposal/offer, or a considerable stock. A tender offer is an offer to buy shares from a shareholder of an acquirer’s company at a higher price than the market price.
A proxy vote is when an acquiring business influences current shareholders to vote out the target company’s administration so that it can be taken over easily.
In Adani Group vs NDTV’s case, the Adani chose to acquire the channel by purchasing large stocks.
Ways a company can prevent a hostile takeover
There are various ways a company can prevent hostile takeover. Some methods are listed below:
The white Knight: If the target business’s board believes it won’t be able to prevent a hostile takeover, it can look for a more friendly company to buy a controlling role in the company before the hostile bidder does.
Greenmail: Greenmail is a protection in which the target business buys back its stock from the acquirer at a more elevated price.
Crown Jewels: The target company decreases its attractiveness to the buyer by trading off its most valuable asset, which may have initially attracted the acquirer. The target firm might use this technique in intersection with a white knight.
Poison Pills: In this strategy, the target firm dilutes its shares to the point where the acquirer cannot achieve a controlling position without paying huge costs.