Aditya Birla Group on Saturday said that it is spinning off the cement business of Grasim Industries into a wholly owned Consolidation of cement biz subsidiary Samruddhi that will eventually be merged with the group's Ultratech Cement to maximize shareholder value and consolidate its cement business.
The group controls a fifth of the world's second largest cement market and is looking at an investment of INR 15,000 crore to maintain its share.
Mr Adesh Gupta whole time director and CFO of Grasim' said that the diversified company had invested INR 8,500 crore in cement over eight years by using cash from its viscose stable fiber business. He said that "Investors now want a pure play company to take the group's cement business to a new level.”
As per report Samruddhi will issue one equity share of INR 5 each to the Grasim shareholders for every share they held and will be listed with the stock exchanges. Post the transaction, Grasim will directly hold a 65% stake in Samruddhi while Grasim shareholders will own the remaining 35%.
According to Mr Gupta, Samruddhi has resolved to pursue its consolidation with UltraTech, in which Grasim owns a 56% stake. Mr Gupta, who is also a director of Samruddhi, said the entire consolidation process is expected to be over in six to eight months. Post consolidation, Grasim will hold anything between 56% and 65% stake in UltraTech. ET was the first to report on the consolidation of the Aditya Birla group's cement business in its edition on June 25.
Mr Kumar Mangalam Birla Group chairman in a statement said that the structure of transferring Grasim's cement business to UltraTech via Samruddhi was found superior as it would ensure Grasim's strategic control in UltraTech.
Mr Gupta said that the company examined two other options a vertical split of the cement business or a merger of UltraTech with Grasim. The first option would have given more direct holding to Grasim shareholders, but it would have resulted in loss of Grasim's control over UltraTech. The second option would have not created a pure play cement company.
Mr Vallabh Bhansali chairman of Enam Securities which advised Grasim along with DSP Merrill Lynch said that "The structure of the transaction is a balancing act which aims at keeping Grasim's strategic ownership as well as rewarding the Grasim shareholders.”
(Sourced from http://www.steelguru.com/news/index/2009/10/05/MTE0NjQy/Grasim_spins_off_cement_business_into_100pct_subsidiary.html)
Sunday, October 4, 2009
Grasim spins off cement business into 100pct subsidiary
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