The board of directors of Babayev, one of the largest confectionery makers in Moscow, is calling on the consortium led by the Inkombank commercial bank to buy out all interested shareholders.
The talk -- unfamiliar on Russia's fledgling financial markets -- is of poison pills, white knights and defending shareholder rights.
The five-strong consortium said Oct. 6 it had spent $13 million on acquiring a controlling stake, which represented more than 50 percent of the company.
The group, which includes investment bank N.M. Rothschild and the Koral cocoa supply company, said it had enough shares but would continue to buy them for a week in line with obligations already undertaken.
Russian law does not require a company bidding for another to buy out minority shareholders. "Unfortunately, standards are still being worked out," a Federal Securities Commission official told Reuters.
But a Babayev statement said the board had asked the group to buy shares from all interested holders "at a fair price which represents the minority shareholders' stake in the factory or is at least equal to the price paid by members of the consortium."
"The suggestion from the board of directors of Babayev is that all shareholders should be treated equally," said Alexander Tsapin of Pioneer Securities, consultants to Babayev.
He said the consortium had paid about $1.23 each for the Babayev shares it bought in the secondary market.
Tsapin said that when Babayev's management realized in September someone was buying its shares it also began buying as a defense. Management now had less than 10 percent and Babayev employees had between 10 and 15 percent, he said.
Tsapin said the consortium's reaction to the idea had so far been negative. Asked if the dispute could delay the takeover, he said, "It may. If they use poison pills or some other measures of protection, it may put some pressure on the consortium."
He added, "If the takeover goes ahead, there might be a situation where these guys find their liabilities increased.
"If the consortium does not want to take up this offer, somebody else might."
Tsapin also said it was not clear whether the consortium, really did control more than 50 percent of Babayev, as some of the shares had not been registered.
Masha Florentyeva, head of the mergers and acquisitions department at Inkombank, said that as the Babayev board of directors was due to meet later Monday, it was not clear in whose name the company's statement had been made.
"Until the end of the meeting of the board of directors we will not comment on the situation," she said.
In July, a group based on Bank Menatep made Russia's first hostile takeover bid for the Red October chocolate factory. It offered to buy 51 percent of the company at $9.50 a share but failed to muster enough shares. The bid collapsed but the two groups agreed to cooperate in future.
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