Financial Daily from THE HINDU group of publications
Saturday, Mar 08, 2003
Corporate - Mergers & Acquisitions
Markets - Open Offers
Grasim hopeful of nod to open offer for L&T stake
MUMBAI, March 7
IT appears that Grasim's open offer for 20 per cent equity stake in Larsen & Toubro (L&T) stands a chance of being cleared.
On Friday, the company made a public announcement that ends optimistically: "The revised offer schedule will be intimated to shareholders of L&T upon receipt of SEBI's observations on the revised draft letter of offer.''
The open offer had been stalled in November 2002 pending SEBI investigations into Grasim's purchase of 10.05 per cent stake in L&T.
The announcement also contains a letter sent by Grasim to SEBI on March 3 with an enclosure titled `Draft for revised inclusion in the public announcement; rationale for the offer and future plan'.
Grasim's letter says: "We enclose the suggested draft of the disclosure which Grasim may make in its finalised letter of offer. We now request you to kindly clear our present offer to acquire up to 20 per cent of the total subscribed and fully paid-up equity capital of L&T...at the earliest.''
The company's announcement detailed the clarifications sought by SEBI during its investigation as well as its own replies to these clarifications.
A spokesperson for Grasim said that the announcement, intended for the shareholders of L&T, was made at the instance of SEBI itself.
According to the Grasim's public announcement, SEBI's recent letter of March 5 asks it to "disclose that that the offer is made for the purpose of substantial acquisition of shares without change in control''.
SEBI has also asked whether the offer size is in conformity with takeover regulations and ordered Grasim to disclose how benefits of its acquisition in L&T will accrue to it "when the offer is made only for substantial acquisition of shares and voting rights without any change in control.''
Grasim has also been asked to justify the offer price in terms of applicable provisions of the regulations, taking into consideration the various submissions made by the acquirer during the course of investigation conducted by SEBI including the valuation of L&T by Grasim.
(A week ago, Grasim had told the stock exchanges that its alternative offer for L&T's cement division was at Rs 130 per share and that its valuation of L&T itself was at Rs 292.5 per share.)
The company also said that an earlier communication from SEBI dated February 25 had detailed the findings on its investigations.
These include findings that Grasim did not mention the objective and purpose of the acquisition of shares of L&T, it has not made any disclosure regarding its intention to acquire control of the company, or L&T's cement business.
It also seeks an explanation for the alternative proposal that Grasim had made to L&T for its cement division where it had valued L&T at Rs 292.5 per share, whereas its original open offer price was Rs 190.
`Offer price is key issue'
GRASIM'S public announcement to the shareholders of L&T has raised many eyebrows in market circles.
According to Grasim officials, the public announcement has been made at the instance of SEBI.
However, it is not clear whether the SEBI investigations into Grasim's acquisition of 10.05 per cent stake in L&T from Reliance Industries are complete.
One of the key issues being investigated is whether Grasim had acquired management control in L&T with this acquisition.
According to Grasim's announcement, SEBI has asked Grasim to justify the offer price.
"It appears that the offer price is the key issue that remains, and that the inclination is to allow the open offer,'' an official close to the developments said.
Another indication that reinforces this is SEBI's request that Grasim disclose its valuation of L&T in its alternative proposal for the company's cement division, the official added.
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