Adani Ports and Special Economic Zone Ltd (APSEZ) is left holding a 26 per cent stake in Snowman Logistics Ltd after walking out of a deal to buy a 40.25 per cent stake from the promoters of the Mumbai-listed cold chain company for ₹296 crore.
On May 6, BusinessLine had first reported, quoting Chief Executive Officer (CEO) Karan Adani, that APSEZ was reviewing the deal which could result in scrapping the deal or re-negotiating the price.
The acquisition was announced by APSEZ on December 27 and was to be closed by March 31.
Re-assessment by Adani
“The condition for completion of transaction by March 31, 2020 was not met by the Acquirer, and the Seller has notified the Acquirer and the Company that the Agreement is not in force due to repudiation of the Agreement by the Acquirer,” Snowman Logistics said in a filing with the Bombay Stock Exchange.
“This means there has been a breach of agreement by the acquirer. As a result, APSEZ doesn’t have the right to purchase the shares from the promoters anymore,” said a person briefed on the development.
APSEZ, he said, didn’t disclose what it wanted and there was no discussion on re-negotiation on price.
“We have acquired a 26 per cent stake from the market as part of open offer and we have kept on hold the stake of 40.25 per cent that we have to buy from the promoters,” Karan said during an analyst call on May 6.
Market sources said that APSEZ would look to wrest a board seat with the 26 per cent stake, if it intends to stay invested in Snowman Logistics. “ But, off-loading the 26 per cent stake in the market would drag down the share price of Snowman, entailing a loss to APSEZ,” a stockbroker said.
APSEZ had agreed to buy the stake from Mumbai-listed Snowman Logistics’ parent company Gateway Distriparks at ₹44 per share.
The deal was announced in December last year after which APSEZ acquired a 26 per cent stake in the cold chain company in March through a mandatory open offer to public shareholders.
The acquisition was done through APSEZ’s wholly-owned subsidiary Adani Logistics.
Snowman Logistics runs integrated cold chain logistics and provides warehousing, distribution and value-added services. It operates 31 temperature-controlled warehouses at 15 locations, with 1.04 lakh pallets warehousing capacity and 293 refrigerated vehicles (reefers).
But, on May 6, during an analyst call, Karan Adani said: “We are re-evaluating the deal looking at the current situation and we want to re-assess what is the impact on cold storage business because of COVID-19. We are re-looking at the industry itself, whether the cold chain business makes sense in the current environment and if not , then we would be looking at re-negotiating on the price”.
Experts have down-played this explanation by Karan Adani.
“In fact, warehousing and cold chain requirements for food and pharmaceuticals would see a huge traction in the wake of the coronavirus outbreak,” said a logistics industry executive.
Source: The Hindu Business Line