22nd July 2005: The $17-bn electronics major Flextronics is having second thoughts about its plans for delisting its Indian subsidiary, Flextronics Software Services. This follows a difference of opinion with its shareholders over the buyback price. While the MNC has offered a buyback price of Rs 575 a share, some of the non-promoter shareholders are learnt to be asking for a price in the region of Rs 700 a share.
Under the new rule, delisting can be done only through the reverse book-building process where shareholders can quote their prices and the average price has to be taken as the buyback price.
Flextronics currently holds close to 70% stake in its Indian subsidiary. Financial institutions, both domestic and overseas, hold a major portion of the remaining stake, with HSBC Global Investment Fund having the single-largest portion at a little over 5%. With the open offer in limbo, the company is also redrawing its earlier plans to consolidate the four software companies it has acquired in India.
Confirming that the buy-back offer, approved by the shareholders last month, is in limbo, Flextronics president (design & ODM services) Ash Bharadwaj said “We have no plans to revise our prices for the proposed buyback of the remaining shareholding in the company. We are already offering a premium over the price we paid to the promoters earlier and in the first open offer.”
The company had earlier announced plans to delist Flextronics Software Services (erstwhile Hughes Software Systems) and merge the three other software companies it had acquired — Futuresoft, Deccanet and Emused — with it.