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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (10311)	12/25/1999 12:41:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

UK firm offers to pick up 50 per cent stake in L&T cement division larsentoubro.com (Saturday, December 25, 1999-bs) Baiju Kalesh in Mumbai Holder Bank, the UK-based cement major, has approached Larsen & Toubro with a proposal to pick up 50 per cent stake in its proposed cement company for a consideration of approximately Rs 3,300 crore. L&T is considering demerging its cement division into a separate company as part of its restructuring plan. This is currently under consideration. The proposal will be taken up by the board for discussion on January 10, 2000. L&T has, however, valued its cement division at Rs 7,500 crore ($ 1.8 billion), say industry sources. This translates 50 per cent of equity in its proposed cement company at Rs 3,750 crore ($872 million). When contacted, Mohan Karnani, the L&T president (cement division) denied the offer made by Holder Bank. He pointed out that the restructuring proposal will be announced by the company?s managing director and chief executive officer A M Naik on January 10. The L&T board is meeting on the same day to deliberate and take on record the recommendations made by Boston Consulting Group (BCG). Sources claim that L&T has made presentations to many international cement producers including Lafarge, Cemex and Blue Circle . In its presentation, the company has elaborated on its plans for this cement division which contributes 24 per cent of the revenue. Holder Bank had submitted the proposal through an international merchant banker, sources familiar with the deal said. Sources said Lafarge (France) had held four meetings with L&T officials on forming a 50:50 joint venture in the cement division. Sources familiar with the deliberations on BCG report indicate that the total value of the cement division is estimated at around Rs 7,500 crore of which Rs 3,358 crore of debt is included in L&T books. L&T has valued the share price of its company including the cement division at Rs 675 per share, sources said. This is at 43 per cent premium to the existing market price of Rs 471. The company is the largest cement manufacturer in the country with a capacity of 12 million tonnes. The company is adding another 2 million tonnes which is under implementation. L&T is the market leader in the western market with around three plants and two plants in the south. Industry observers expect the acquisition cost of one million tonne cement unit at around Rs 400 crore. Gujarat Ambuja Cement Ltd had recently acquired 1.4 million tonne DLF Cement unit at around Rs 350 crore in addition to the outstanding loans of around Rs 150 crore. Sources said the BCG, in its preliminary report, had advised L&T to hive off the cement division into a separate company and offload 26 per cent to a new joint venture partner. The consultants also advised the construction major to offload 50 per cent stake to its existing shareholders while holding the rest with the company. The company had also taken a decision that it will invite joint venture partner only in its cement division and not in the engineering and construction division. Around 56 per cent of the revenue comes from engineering and construction activities and 24 per cent from the cement division.