Abstract
Reliance Industries Limited (RIL) has made an acquisition of 14.12% stake in EIH (Eastern India Hotels) Limited for about Rs 1021 Crores. At this valuation, the deal price works out to at Rs 184 per share of EIH.This transaction is significant, because ITC is holding about 14.98% stake in EIH Limited, and it is widely anticipated that ITC may be looking to make a hostile takeover bid on EIH Limited.By bringing in RIL as a 14.12% stake owner, it may become difficult for ITC to make any takeover attempts of EIH. This is an internationally widely followed M&A strategy termed White Knight, wherein the target companybrings in a new acquirer, to keep a potential acquirer away from taking it over. Here, RIL is a perfect White Knight for EIH.Either ways, the ultimate beneficiaries of the scene would be the minority shareholders of EIH, because the competition between RIL and ITC may lead to strong prices being offered for EIH.
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