Grasim Picks Up Bangurs Stake In Shree Digvijay

The Rs 4,022.59 crore Grasim Industries, flagship of the Aditya Birla group, wrapped up its third acquisition in four months by buying out the Calcutta-based Bangurs' stake in Shree Digvijay Cement Company Ltd (SDCC) for Rs 34.40 crore.

Grasim will now make a public offer for the remaining 20 per cent stake at Rs 142.30 per share (the acquisition price) taking the total acquisition cost to Rs 66 crore. Grasim purchased 32.42 per cent from Bangurs and another 9.9 per cent from one of Bangur's associates. This was done early last week.

This is Grasim's third acquisition in four months and symbolises the different growth approach mapped out for the group by Kumar Mangalam Birla, who took over in 1996. Grasim had earlier acquired a pulp mill in Canada and Dharani Cements, a Tamil Nadu based cement unit.

 

The acquisition gives Grasim a foothold in Gujarat complete with an all-weather jetty. Digvijay produces 1.10 million tonnes of ordinary portland cement and speciality cement of 0.15 million tonnes at Sikka, Jamnagar, Gujarat.

Restricted hitherto to the interiors of Rajasthan and Madhya Pradesh, Grasim will now have the advantage of a port-based cement plant like Gujarat Ambuja.

Chairman Kumar Mangalam Birla said in Mumbai yesterday that the SDCC acquisition is a major strategic move. "It enables Grasim to attain a prominent position in high growth state of Gujarat. This takeover is yet another example of our overall group strategy of focusing on those core sectors where we can attain clear leadership position and add shareholder value," he added.

Grasim will also be taking over some of Digvijay's liabilities including a sales tax figure of Rs 56 crore. Thanks to lobbying with the Gujarat government that figure has now been frozen at Rs 49 crore payable in five years of 10 installments.

Grasim will also take over existing debts of Rs 57 crore and infuse funds of Rs 69 crore into planned capital expenditure.

The takeover ends months of hard negotiations and bargainingwhich began mid-last year when the Bangurs approached Aditya Birla group to buy the company. A deal was close to being struck early this year but fell through as the position of some of Digvijay's liabilities could not be resolved.

Though the cement plant had some distinct advantages, the liabilities had concerned senior Aditya Birla group executives who wanted to proceed cautiously.

Three merchant bankers were involved in the deal, I-Sec, Enam Financial Consultants and DSP Merril Lynch. While I-Sec advised caution in proceeding with the deal, Enam Financial Consultants advocated a buy-out at a higher price.

Not satisfied, the group roped in DSP Merril Lynch, which had successfully concluded the Dharani Cements deal. DSP lowered the price but still advocated a buy. Price Waterhouse conducted the due diligence while Mulla & Mulla were the legal advisors.