abhishreshthaa
Abhijeet S
The demerger was a three-step process as follows:
- In the first phase, 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 (Grasim) holding in CemCo to 51 per cent and L&T will realise Rs 362 crore on sale of its stake in Ultra Tech CemCo.
- In the third phase, L&T Employee Welfare Foundation will acquire the Birla's 15.3 per cent stake in the residual engineering company for Rs. 446.40 crore
The Demerger ratio
As per the Demerger ratio for every 2 shares (of face value Rs 10) held in L&T, the shareholder was given 1 share (face value Rs 2) in the New L&T.
At the same time for every 5 shares held in L&T, the shareholder was given 2 shares in the demerged cement company – Ultra Tech CemCo.
What has happened if you had 100 shares in L&T?
If you had 100 L&T shares, you will now have…
50 shares (of face value Rs 2) in the New L&T and
40 shares (of face value Rs 10) in the cement company – Ultra Tech CemCo.
Scheme of arrangement
Effective Date : 14-05-04
It means the date on which certified copies of the Order(s) of the High court at Mumbai vesting of all rights are filed with the Registrar after obtaining the necessary consent
Record Date: 27-05-04
It is the date fixed by L&T for determining the equity shareholders of L&T to whom shares of Ultra Tech will be allotted pursuant to the scheme
Important Dates
Appointed Date: 01-04-04
It means 1st April or such other date as the High Court at Bombay may direct.
Specified date : 27-05-04
It is the date for determining the names of shareholders to whom the letter of offer should be sent. This day shall not be later than the 30th Day from the date of announcement
Parties to the Restructuring Agreement
Larsen & Toubro Limited (L&T)
Ultra Tech Cemco Limited
Grasim Industries Limited
Samruddhi Swastik Trading and Investments Limited (wholly owned subsidiary of Grasim), &
The L&T Employees Welfare Foundation Trust
Larsen & Toubro Limited
Incorporated in February, 1946
It is India's largest engineering and construction conglomerate
Has diversified into cement, information technology (IT) and communications
Key interests in electrical and electronics products, construction equipment and packaging products.
Ultra Tech Limited
Ultra Tech was incorporated on August 24, 2000 as “L&T Cement Limited”.
Changed to Ultra Tech Cemco Ltd. On Nov,19’2003
Object to carry on the business of manufacturing of cement
Has a wholly owned subsidiary, Dakshin Cements Limited, an unlisted company
Dakshin Cements owns certain mining leases in state of A.P. and does not have any commercial operations as of date
Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks among India's largest private sector companies
Starting as a textiles manufacturer in 1948, Grasim's businesses today comprise
Viscose Staple Fibre (VSF)-24% global market Share
Cement – world’s 8th largest producer
sponge iron- largest merchant producer
Chemicals - Has India's second largest caustic soda unit.
Textiles – Premium Brands include “Grasim” and “Graviera” range of fabrics
The demerger was a three-step process as follows:
In the first phase, 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 (Grasim) holding in CemCo to 51 per cent and L&T will realise Rs 362 crore on sale of its stake in Ultra Tech CemCo.
In the third phase, L&T Employee Welfare Foundation will acquire the Birla's 15.3 per cent stake in the residual engineering company for Rs. 446.40 crore
The Demerger ratio
As per the Demerger ratio for every 2 shares (of face value Rs 10) held in L&T, the shareholder was given 1 share (face value Rs 2) in the New L&T.
At the same time for every 5 shares held in L&T, the shareholder was given 2 shares in the demerged cement company – Ultra Tech CemCo.
What has happened if you had 100 shares in L&T?
If you had 100 L&T shares, you will now have…
50 shares (of face value Rs 2) in the New L&T and
40 shares (of face value Rs 10) in the cement company – Ultra Tech CemCo.
Scheme of arrangement
Effective Date : 14-05-04
It means the date on which certified copies of the Order(s) of the High court at Mumbai vesting of all rights are filed with the Registrar after obtaining the necessary consent
Record Date: 27-05-04
It is the date fixed by L&T for determining the equity shareholders of L&T to whom shares of Ultra Tech will be allotted pursuant to the scheme
Important Dates
Appointed Date: 01-04-04
It means 1st April or such other date as the High Court at Bombay may direct.
Specified date : 27-05-04
It is the date for determining the names of shareholders to whom the letter of offer should be sent. This day shall not be later than the 30th Day from the date of announcement
Parties to the Restructuring Agreement
Larsen & Toubro Limited (L&T)
Ultra Tech Cemco Limited
Grasim Industries Limited
Samruddhi Swastik Trading and Investments Limited (wholly owned subsidiary of Grasim), &
The L&T Employees Welfare Foundation Trust
Larsen & Toubro Limited
Incorporated in February, 1946
It is India's largest engineering and construction conglomerate
Has diversified into cement, information technology (IT) and communications
Key interests in electrical and electronics products, construction equipment and packaging products.
Ultra Tech Limited
Ultra Tech was incorporated on August 24, 2000 as “L&T Cement Limited”.
Changed to Ultra Tech Cemco Ltd. On Nov,19’2003
Object to carry on the business of manufacturing of cement
Has a wholly owned subsidiary, Dakshin Cements Limited, an unlisted company
Dakshin Cements owns certain mining leases in state of A.P. and does not have any commercial operations as of date
Grasim Industries Limited
Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks among India's largest private sector companies
Starting as a textiles manufacturer in 1948, Grasim's businesses today comprise
Viscose Staple Fibre (VSF)-24% global market Share
Cement – world’s 8th largest producer
sponge iron- largest merchant producer
Chemicals - Has India's second largest caustic soda unit.
Textiles – Premium Brands include “Grasim” and “Graviera” range of fabrics
Shareholders of Grasim, Samruddhi and L&T are not entitled to participate in the offer
After the open offer, Grasim & Samruddhi would in aggregate hold 51.08% of the Emerging Share Capital of Ultra tech.
Break up :
12.6% Through issuance of shares by Ultra Tech on account of Demerger
30% through Open offer
8.5 % purchase of stake from L&T
Ultra Tech will issue approx. 10 Crore shares to L&T shareholders and increase its paid-up capital to 12.5 Crore fully paid up equity shares of Rs. 10 each
Grasim offers to purchase up to 3,73,19,587 fully paid up equity shares aggregating 30% of the Emerging Share Capital of Ultra Tech at a price of Rs. 342.60 per share
The management of the Cement business will be managed by Grasim from the date of filing of scheme of arrangement up to the acquisition of management control
Ultra Tech shall have the right to use the “L&T Cement” brand for a period of seven (7) months from the Effective Date i.e. 14-5-04
Any dividends which accrue in relation to L&T Shares for and from the financial year 2003 - 2004 shall accrue to Trust.
L&T shall divest its balance shareholding of 11.5 % in Ultra Tech before 31-12-2009
The Offer and the acquisition of the shares of Ultra Tech would be exempt under Regulations 3(1)(j)(ii) and 3(1)(k) of the SEBI (SAST) Regulations, 1997
Escrow Arrangement
The amount of Rs. 1279 crores, being the Offer Consideration, is deposited in an interest bearing escrow arrangement.
As of effective date the L&T Shares, Ultra Tech Shares and the respective considerations shall be deposited in escrow with an escrow agent
Share escrow agent will hold the Ultra tech shares, L&T shares and the offer consideration till Grasim holding in Ultra tech is 41.5%
Offer Consideration
The maximum purchase consideration payable by Grasim in the case of full acceptance of the Offer will be of the order of Rs 1,278.6 crores.
Grasim has deposited the total consideration for the Offer of Rs. 1,279 crores in escrow with an escrow agent namely UTI Bank Ltd, Branch: Fort Branch in the following manner:
(i) An amount of Rs. 128 crores equal to 10% of the gross value of the Offer was deposited on December 10, 2003 i.e. within 1 business day of filing of the Scheme before the High Court;
(ii) An amount of Rs. 1,151 crores equal to the remaining 90% of the gross value of the Offer was deposited by April 22, 2004 i.e. within 90 days of the date of filing of the report by the chairman of the meeting of L&T’s shareholders and creditors, approving the Scheme.
The total of (i) & (ii) is known as “Offer consideration”.
Voting Arrangement
Upon the deposit of Ultra Tech Shares and L&T Shares in escrow as mentioned above, the following voting arrangement shall come into effect:
(i) the voting rights in relation to Ultra Tech Shares, shall be exercised by L&T only in accordance with the directions of Grasim,
(ii) the voting rights in relation to L&T Shares, shall be exercised by Grasim and Samruddhi only in accordance with the directions of Trust,
Upon the release of the shares and amounts held in escrow, the voting arrangement shall no longer be valid and effective.
Special Account
Grasim shall open a Special account for the purpose of making payments to the shareholders whose shares have been accepted for the offer
Upon the closure of the Offer, Grasim shall certify the same in writing to the Escrow Agent
Then the Escrow Agent shall transfer the Offer Consideration together with any income accrued thereon to the Special Account
The banker to the offer shall be instructed to issue cheques, bankers cheque or demand drafts to the successful offered.
Changes in the Board Constitution
On the deposit of 10% of the Offer Consideration in escrow by Grasim on December 10, 2003, one nominee of Grasim was invited to be a member of the Board of Directors of Ultra Tech from February 4, 2004.
Upon the deposit of the balance Offer Consideration by Grasim by April 22, 2004 in escrow, the Board of Directors of L&T constituted a sub-committee of the Board of Directors called the Cement Business Management Committee (the “CBMC”), on April 30,04
Upon the acquisition of management control, Ultra Tech Committee shall stand dissolved and Grasim shall have the right to appoint the majority of the directors on the Board of Ultra Tech.
On the Effective Date (i.e. May 14, 2004), the Board of Directors of Ultra Tech is to be reconstituted so as to mirror the composition of the CBMC (excluding the invitees) and the CBMC shall stand dissolved.
The release of the share escrow arrangement and completion of the purchase of Ultra Tech Shares from L&T by Grasim and the sale of L&T Shares by Grasim and Samruddhi to Trust and the acquisition of management control shall occur simultaneously and concurrently on the same date after the completion of the Offer
Benefits of Demerger to L&T
Lead to immediate realization of value from cement business;
Create two distinct listed entities for
(a) engineering and (b) cement;
Offers the benefit from all future upturns from cement business out of the remaining shareholding in cement; and
Enable L&T to become focussed Engineering, Construction and Technology Company
Benefits of Demerger to Grasim
Increased Capacity i.e. 13.12 MT of Grasim and 16.5 MT of Ultra Tech viz..30 MT p.a.
Economies of scale & overall competitiveness
Multi-functional synergies in the areas of procurement, marketing, logistics and cost reductions
Combined resource pool of professionals
Cross leverage financial strengths to access domestic and international markets