Takeover of Raasi Cements by India Cements

The Takeover of Raasi Contd...

Raju also had the option of making a counter-offer to his shareholders, and weaning away potential sellers from Srinivasan. But this was an expensive option, (Raju needed approximately Rs 100 crore to make a counter bid) and he did not seem to have the funds to pull it off. Raju's efforts to find a ‘white knight'didn't succeed either. R. Kunjitapadam, technical adviser and vice chairman, Raasi, said, "Some companies did try to help us out of the crisis. We were looking for assistance in the form of a white knight, or joint participation in developing the company further, and parting at a later date."

Raasi approached three sources - Kumar Mangalam Birla (Chairman, A.V.Birla Group), GACL and Switzerland's Holder Bank. Birla wanted a 51% stake while GACL seemed to prefer a takeover. Raju then made a final attempt by talking to Holder bank, but the latter wanted to merge Raasi with its Indian enterprise, Kalyanpur Cements.

Raju expected help from the Andhra Pradesh government and other state industrialists who were against ICL's takeover bid. However, Mr. Chandra Babu Naidu, the Chief Minister of Andhra Pradesh, refused to meet a delegation of state industrialists who wanted to present Raju's case. His only comment to the sale of APIDC's stake in Raasi was, "The old man will be unhappy".

In March 1998, realizing his predicament, Raju began to negotiate with Srinivasan to sell his 33% shares in the company. In an exclusive interview to Business India Raju said, "Though I had 33% of the shares and associates held 10%, I needed another Rs.1 billion for 51%. I did not want to incur further debts. It will take me ten births to repay them. Let this child of mine be happy, even if it's with a new owner."¹⁰

After protracted negotiations with an ICL team which flew down from Chennai to Hyderabad, Raasi decided to let ICL buy its shares at Rs.286 a share. In April 1998, Business World reported, "On paper Raju has reaped a harvest of Rs. 1.49 billion on this deal. But after deduction of all dues and shares for friends and relatives from the promoters'stake of 33%, Raju will net only Rs 30 million in his personal account."

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10] BusinessIndia, April 10, 1998.

Case Details

Case Code : BSTR001
Themes: Mergers Acquisition and Takeovers
Case Length : 8 Pages
Period : 1998-1999
Organization : Raasi Cements Sri Vishnu Cements Limited
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Construction - Building Materials & Equipment

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