The protracted battle for control over the Chennai based Orchid Chemicals & Pharmaceuticals is set to intensify further as its promoter and managing director K Raghvendra Rao is set to rope in financial investors. Ranbaxy promoter Malvinder Mohan Singh is reportedly looking at a negotiated deal in which his company would have substantial stake but retain the existing management.
Sources close to Orchid management said Rao is in discussion with financial investors including private equity firms to do private placement of around 14 per cent equity including his own 7 per cent warrants. The deal is aimed at creating a combined holding of over 26 per cent, which would give the group veto rights to block any special resolution.
This would result in expansion of the equity base, which in turn would result in dilution marginal stake of the existing shareholders including, Solrex Pharmaceuticals.
Solrex Pharma, believed to be an associate firm of Ranbaxy, has already acquired 12.87 per cent stake in Orchid from the market.
“Ranbaxy is looking at a structured deal on the line of Matrix Laboratories in which the US based Mylan Labs acquired majority stake while retaining its promoters N Prasada on the board with minority holding in the parent company – Mylan Labs,” sources close to Ranbaxy said.
However, in this case, Rao would be offered the option of retaining his holding of 17 per cent in the company with management control.
Ranbaxy is looking for some board position depending upon its final shareholding. Malvinder Mohan Singh refused to comment, while Rao, who is currently in Japan, was not available for comment.