How Retail Investors Can Make Money in Claris Lifesciences Buy Back ?
March 24, 2014
Claris Lifesciences has announced an offer for buyback of 9.25 million shares (representing 14.49% of equity share capital) at a price of Rs250 per share on a proportionate basis through the tender offer process. The stock is currently trading at Rs189.
The objective of the Buy Back is to return surplus cash to the Equity Shareholders of the Company. In accordance with Regulation 6 of the Buy Back Regulations, 15% of the number of equity shares during buy back, or number of equity shares entitled as per shareholding of small shareholders, whichever is higher, shall be reserved for the Small Shareholders as part of this Buy Back. The promoter and the promoter group have expressed they will not tender shares in the Buy back offer.
Based on the definition of Small Shareholders, we have classified the possible category for each type of shareholders. With the stock trading at Rs189, any holder having less than 1000 shares will be classified as small shareholder.
Minimum Acceptance Ratio is likely to be as follows
For the Small Shareholder category, the acceptance ratio is higher at 56.45%. In absence of participation in the arbitrage process by the General category, we do not expect the stock to decline below 160 levels. Given the scenario, a retail arbitrageur will be making a profit of around 12.97% in a span of 2 months which is very attractive.
Hence, we recommend retail investors with risk appetite arbitrageurs to participate in the arbitrage process by buying less than 900 shares in the cash segment and tendering it in the buyback process. The scenario analysis at different prices and acceptance ratio is as below