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Grasim to make offer for 30% in Ultra Tech
Mumbai, May 14: Grasim Industries, the Aditya Birla group`s flagship company, will make an open offer for a 30% stake in Ultra Tech Cemco, the cement company carved out of Larsen & Toubro (L&T), around the first week of June.
Mumbai, May 14: Grasim Industries, the Aditya Birla group’s flagship company, will make an open offer for a 30% stake in Ultra Tech Cemco, the cement company carved out of Larsen & Toubro (L&T), around the first week of June.
In line with the arrangement cleared by the Bombay High Court last month, Grasim has offered “to purchase from Ultra Tech CemCo’s shareholders, up to 3,73,20,539 fully paid-up equity shares of Rs 10 each, aggregating to 30% of the company’s emerging share capital for Rs 342.6 per share”. L&T has already fixed May 14 as the effective date for demerger of its 17m tonne cement business into Ultra Tech CemCo.
As per the scheme, L&T will list the cement company within 40 days from the effective date, while Grasim is obliged to make its open offer for a 30% stake in CemCo, within 120 days from the effective date of the demerger.
For the offer to go through smoothly, Grasim will require the support of financial institutions who hold 27% in L&T, along with minority shareholders. The arrangement makes it abundantly clear that the Aditya Birla group, whose stake in Cemco will come to 12.6% post-demerger, will require “one share more than” 50% to get management control of the cement company. Even if financial institutions choose to offload their entire stake in CemCo this will not be adequate for Grasim to hike its stake in CemCo to over 50%. Given the bull run, analysts say the company’s open offer price for CemCo is not attractive enough and may have to be revised upwards. Grasim officials however, dismiss the possibility, saying that the offer price is fair and reasonable. L&T shares rose 0.4% to Rs 543.9 on Thursday. The Grasim scrip surged 3.9%, to close at Rs 1,154.8 on the Bombay Stock Exchange (BSE). The Aditya Birla group’s stake will increase to 21.1% immediately after the demerger, following the buyout of 8.5% from L&T at the agreed price of Rs 342.60. Thus, the Aditya Birla group, in order to get management control of CemCo, will have to ensure that its open offer goes through without any hiccups. As per the three-step demerger plan, L&T will draft the cement business into a separate company, Ultra Tech CemCo, where it will hold 20%. The balance 80% will be held by existing L&T shareholders in a proportionate basis. In the second stage, Grasim will buy 8.5% in Cemco from L&T at Rs Rs 342.6 per share, and make an open offer for another 30% at the same price. The open offer, if fully subscribed, will take the Aditya Birla group’s holding in Cemco to 51%. In the third step, the L&T Employee Welfare Foundation, an employee trust, will acquire the Birlas’ 15.3% shareholding in the residual engineering company. Bureau Report
For the offer to go through smoothly, Grasim will require the support of financial institutions who hold 27% in L&T, along with minority shareholders. The arrangement makes it abundantly clear that the Aditya Birla group, whose stake in Cemco will come to 12.6% post-demerger, will require “one share more than” 50% to get management control of the cement company. Even if financial institutions choose to offload their entire stake in CemCo this will not be adequate for Grasim to hike its stake in CemCo to over 50%. Given the bull run, analysts say the company’s open offer price for CemCo is not attractive enough and may have to be revised upwards. Grasim officials however, dismiss the possibility, saying that the offer price is fair and reasonable. L&T shares rose 0.4% to Rs 543.9 on Thursday. The Grasim scrip surged 3.9%, to close at Rs 1,154.8 on the Bombay Stock Exchange (BSE). The Aditya Birla group’s stake will increase to 21.1% immediately after the demerger, following the buyout of 8.5% from L&T at the agreed price of Rs 342.60. Thus, the Aditya Birla group, in order to get management control of CemCo, will have to ensure that its open offer goes through without any hiccups. As per the three-step demerger plan, L&T will draft the cement business into a separate company, Ultra Tech CemCo, where it will hold 20%. The balance 80% will be held by existing L&T shareholders in a proportionate basis. In the second stage, Grasim will buy 8.5% in Cemco from L&T at Rs Rs 342.6 per share, and make an open offer for another 30% at the same price. The open offer, if fully subscribed, will take the Aditya Birla group’s holding in Cemco to 51%. In the third step, the L&T Employee Welfare Foundation, an employee trust, will acquire the Birlas’ 15.3% shareholding in the residual engineering company. Bureau Report