The Hindu : L&T's three-step demerger

Online edition of India's National Newspaper
Thursday, Feb 05, 2004

Business

Business

L&T's three-step demerger

By Our Staff Correspondent

MUMBAI, FEB. 4. The extraordinary general meeting of Larsen & Toubro held here on Tuesday saw a lot of heat by shareholders of L&T. Two polls were conducted on two main resolutions of scheme of arrangement, involving the proposed demerger and the reduction in the share capital of the residual engineering company from Rs. 248 crores.

The face value of the shares is also being reduced from Rs. 10 to Rs. 2. The poll results would be announced in the next few days.

L&T needs 51 per cent of the shareholder's approval present and voting and 75 per cent in terms of value for the demerger to go through. Grasim officials are confident that both these would be comfortably achieved.

The proposed open offer of CemCo would close only after shares of CemCo are listed. L&T would now move the courts to sanction the scheme as all the amendments were rejected.

With the cement business going out, there was a need to restructure the capital.

"The cement business has to choose its own capital and has been set at around Rs. 125 crores which is fair considering its size. L&T is restructuring its capital and reducing it to one-fifth of nominal value.

It does not have great significance but there are perceptions that value is reduced. It has been clarified by Mr. Naik that there is no erosion of value as there is no asset going out,'' said D. D. Rathi, Group Executive President and Chief Financial Officer, Aditya Birla Group.

As per the three-step demerger, L&T would hive off the cement business into a separate company, Ultra Tech CemCo, where it will hold 20 per cent.

The balance 80 per cent will be held by the existing L&T shareholders proportionately.

In the second phase, Grasim will buy 8.5 per cent in CemCo from L&T at Rs. 342.60 per share and make an open offer for another 30 per cent at the same price.

If fully subscribed, the open offer will make the Aditya Birla group's holding in CemCo to 51 per cent and L&T will realise Rs. 362 crores on sale of its stake in Ultra Tech CemCo.

In the third step, L&T Employee Welfare Foundation will acquire the Birla's 15.3 per cent stake in the residual engineering company.

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