Private Control, Benefits and Issues in Family Businesses - A Case of Emami-Zandu Deal
Posted: 20 Sep 2009
Date Written: September 2, 2009
Abstract
The research paper discusses and analyses the stakeholders’ issues relating to the takeover where two families’ interests are conflicting. Two families namely Vaidyas and Parikhs were controlling the ownership of Zandu Company. One family, Vaidyas, sold its stake to Emami which went on to purchase Zandu’s shares. The Parikh family owns around 18% of the 98-year-old Zandu Company.
Emami wanted to utilize Zandu’s business potential and the R&D facilities that may enable and support quicker product launches, brands development and product extensions. It wanted to aggressively claim a large market share. It was already holding 3.5% in Zandu, increased its stake to 27.5% by buying 24% for Rs. 130 crore and paid Rs. 6900 per share from Vaidya family, one of the promoters of Zandu Company. After acquiring the stake, Emami board said that they want to work with Zandu for their future growth. But the Parikhs, being co promoters, were disagreeing to Emami becoming dominant stakeholder and decided to allot preferentially to hike their shareholding. The new member prevented them from doing so. Hence the significance of private control, benefits and issues of the controlling families is to be considered.
The question arose when the other interested family wanted to preferentially allot themselves shares to continue their stake.
Keywords: Private Control, Emami- Zandu deal, Corporate Governance, Acquisitions
JEL Classification: M40, G34, G34, G35
Suggested Citation: Suggested Citation