Reliance MediaWorks launches a counter bid to acquire Fame

Reliance MediaWorks launches a counter bid to acquire FameReliance MediaWorks has launched a counter bid to acquire a majority stake in the theater chain Fame India Ltd in an open offer.

The shares of Fame India recorded a rise after the bid with a steep premium was announced on Monday by Reliance Group Company. The move is expected to start a price war in the market.

The counter bid is 63.5 percent higher at 83.40 rupees a share from 51 rupees a share offered by Inox Leisure to acquire 20 percent equity in the company. Reliance intends to acquire 62.08 percent stake in the company.

Inox already holds 50.48 percent stake in the company while ADAG group companies have acquired 10.26 per cent stake in Fame India. Analysts say that Fame India is a well established company in the segment and hence the buyers will have to offer a premium on the acquisition.

Analysts also say that the foreign currency convertible bonds of the company which are to be redeemed next year will be converted into equity. This could result in a fall in the holding of Inox in the company.

The bidding war could lead to an even higher bid by Inox. Fame has a debt burden of 1.4 billion rupees out of which foreign currency convertible bonds account for 850 million rupees.

Some analysts believe the bid is expensive as the company is trading at 12-month forward price to earnings multiple of 330 against multiple of 13-16 for companies like Inox, PVR and Cinemax.

ICICI Securities is the offer manager to Reliance Capital while Enam Securities is the merchant banker for Inox. Fame India is valued at $62 million and has presence in many cities across the country.

Shares of Fame India rose 5 percent to trade at 86.5 rupees.