A Takeover Battle - Grasim vs. L&T

            
 
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Case Details:

Case Code : FINC024
Case Length : 19 Pages
Period : 2002 - 2003
Pub. Date : 2005
Teaching Note : Available
Organization : Grasim, L & T, SEBI
Industry : Financial Services
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Introduction Contd...

Hence, Grasim proposed a vertical demerger plan for L&T in November 2002. Under this plan, all L&T shareholders were to get a stake in the new cement company, in the existing proportion of their respective stakes. In addition, it proposed that the cement company be listed on various stock exchanges.

Grasim also obtained a court stay over L&T's demerger plans. At the same time, Grasim began negotiating with the FIs to attain their support for its vertical demerger plan. Obviously L&T did not agree to this plan which further aggravated the situation. The dispute, which dated back to September 2001 when Grasim first bought a stake in L&T, soon became one of the most bitterly fought battles in India's corporate history. Media reports extensively covered the frequent allegations and counter-allegations made by both the parties. The vertical demerger issue generated much interest, as most disputes always do. Market watchers and analysts expected the drama to intensify further in the near future.

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Background Note

GRASIM

The Aditya Birla Group, well established in the manufacture of man-made fibers, was incorporated in August 1947 (Grasim was formerly known as Grasim Rayon). Since then, the company had been operating in viscose staple fiber5(VSF), cement, sponge iron, chemicals and textile businesses.

By the end of the 1990s, it was India's largest and the lowest cost manufacturer of VSF with a capacity of 220,775 tonnes per annum. The company had a 90% market share in the Indian VSF market and 24% market share worldwide. Besides Grasim was also India's largest manufacturer of Sodium Sulphate, a by-product of VSF manufacturing. In the early 21st century, Grasim ranked tenth amongst India's private companies in terms of sales and assets. For the fiscal 2001, the company reported a profit of Rs 3.02 billion and in 2002, it had a strong reserve base of over Rs 26.25 billion. The Grasim empire spanned over 40 companies in 16 countries, employing 72,000 people...

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5] Viscose Staple Fibre (VSF) is a man-made, extremely versatile fibre with characteristics similar to cotton. This makes it easy to blend the fiber with other material.

 

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