Carborundum Universal India (CUMI) has opposed the proposed acquisition of Winterthur Technologies AG of Switzerland by 3M.
The company said 3M’s buying of Winterthur Tech is an indirect acquisition of Wendt India, a company that manufactures super abrasives and is a joint venture of Carborundum Universal and Wendt GmbH.
In a filing to the Bombay Stock Exchange, CUMI said, “We have come to know from press releases and official websites of Winterthur Technologies AG and 3M, USA, that 3M proposes to acquire a controlling interest in Winterthur Technologies through 3M (Schweiz) AG. The company has notified that potential indirect acquisition of Wendt India shares by 3M constitutes a breach of the shareholders' agreement executed between Carborundum and Wendt GmbH, under which, Carborundum has been vested with a first right of refusal to buy Wendt India shares”.
“While we have no legal standing or any objection about 3M buying Winterthur, our objection is confined to the Wendt India piece, of it being packaged along with it. If Wendt India is offered to us, then we have no objection,” said K Srinivasan, director, Wendt India and managing director, Carborundum Universal.
In the last five years, Wendt India’s ownership changed thrice, which has affected the company's growth. Another change would complicate matters further because the company acquiring the business has presence in India in the same area where Wendt India is present. In the earlier changes, those companies had no Indian operations, Srinivasan said.
Between 2001 and 2005, the company grew three times, while in the following five years — 2005-2010 — it did not register growth even by 50 per cent said Srinivasan.
“We have requested the parters to set right the legal problems, which they created themselves by redressing the issue immediately. The correct way is to offer Wendt India shares to Carborundum. They cannot transfer it to a competitive company, according to the shareholders agreement. It is not we who started the action. The action has been triggered by them by unilaterally going ahead and selling the company,” he said.
The Carborundum’s notice points out that FDI regulations prevent a foreign investor from having investments in more than one entity engaged in the same field of activities, where one of the entities is a joint venture partnership. It is possible only after obtaining a consent of the Indian joint venture partner and the Foreign Investment Promotion Board (FIPB), it said.
“It may be noted that 3M has an existing operation in India engaged in the same field of activities as the company. Carborundum has also informed the company that it has not been approached for consent for the transaction and that it has categorically withheld the consent,” the notice read.
Wendt (India), is a manufacturer of superabrasive grinding wheels and tools (diamond and cubicboron nitride). The company was incorporated in 1980 as a joint venture between Wendt GmbH and the House of Khataus. In 1991, CUMI, a $3-billion Murugappa Group Company, acquired the Khatau’s stake. Since then WIL has been a 40:40 joint venture between Wendt GmbH and CUMI. The public holds the balance 20 per cent equity.
3M is a US-based diversified innovative technology devices manufacturer with $23 billion in sales, and employs 75,000 people worldwide. It has operations in more than 65 countries, including India.
