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Sparring Thoughts

May 2, 2008

There is something inherently different today. I was reading Paul Kedrosky’s blog and the issue of Ebay and Craigslist.Then I came across, within the next hour a share spat between L&T, a solid heavy engineering group with interests in construction, defense,turnkey projects basically look-around-and-you-will-find-sorta-business and Birla Groups Grasim Industries. Grasim on the other hand is a business identity with its stamp on cement, textiles, retail and what not.

Apparently the bone of contention is in the papers. Someone said, the devil is in the details. Well, oh yes! it is. The spat comes with LNT claiming that an equity takeover deal by Grasim from Reliance Industries way back in lates 1980s. In 2004, Grasim Industries had around 15.75% and as per the Capital Market rule at that time, any third party owning more than 15% of stake in an industry must bid for an additional 20%. Well, Grasim decided against it. It sold off 14.95% and retained around 0.8%.

The situation takes a reverse swing of cricket from now onwards. LNT management claims that extra 0.8% as a hostile acquisition and there was a clause included to pacify both parties(interpretation added are mine) that if LNT Employee Welfare Fund had its stake reduced to a certain limit Grasim has to sell it off the rest of its stake.
Well, the problem is with price. LNT says, clause mentions it as Rs 120/share (around USD 3), but going by the existing market price, it is around Rs 3104.80 (~USD 77.6/share at the time of writing). Total stake is around 1.9million shares. Well you do the maths.

If Birlas are to sell off, with Rs120/share the booty roughly amounts to INR 27crore, at present price its around Rs 590 crores and going by the 52 week high of USD 100, it will be around INR 856 crores.

Quite a handful when compared to 27 crores..

Any thought to spare?
Read more about it here

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