Larsen & Toubro (L&T) is close to pulling out of Aditya Birla Group firm UltraTech Cement by selling its entire 11.5% stake, bringing the curtains down on a six-year-old acrimonious relationship.
A person close to the development said Citi, advisor to L&T for the transaction, sold 10 million shares (8.3% stake) through a series of off-market deals late on Wednesday evening. “The book will remain open till tomorrow (Thursday) morning. The entire lot is expected to be sold once Hong Kong and Singapore markets open,” he said.
According to the person, the series of transactions were done at Rs 720-735 a share, lower than UltraTech’s closing price of Rs 763 on the BSE on Wednesday. At this price, L&T would be able to earn around Rs 1,000 crore from the deal.
A clutch of domestic mutual funds, insurance companies and foreign institutional investors bought the shares in small parcels — less than 1% stake each. Although their identity could not be ascertained, it is learnt that the list of bidders include ICICI Prudential MF, Bajaj Life Insurance, Fidelity, SBI Life, SBI MF, Birla Sun Life Insurance, LIC, Blackstone and Oppenheimer.
The Aditya Birla group, which has the right of first refusal in case L&T sells shares, did not participate in off-market deals. When contacted, Adesh Gupta, CFO of Grasim Industries, parent company of UltraTech, said they did not buy any shares on Wednesday.
An L&T spokesperson said: “We have decided to sell our stake in UltraTech before the stipu-lated time (December this year), as we want to pull out of cement which is not our core operation.”
ET had reported in its edition on May 28 that the Birlas won’t buy L&T shares in UltraTech, as they do not want to launch an open offer. Under the Sebi laws, promoters are supposed to come out with a mandatory open offer if they buy more than 5% in a year. Grasim holds a shade below 55% in UltraTech.
The Birlas enjoy the right of first refusal on L&T’s holding under an agreement it had entered into with the engineering giant in 2003. The pact also made it clear that in case the Birlas do not exercise their right, L&T has the liberty to sell its shares in small tranches to financial investors. However, L&T is not allowed to sell the shares to strategic investors.
The 2003 pact allows L&T to sell its stake by the end of 2009. The agreement had helped end an epic corporate battle, which saw Grasim made an open offer for L&T. It ended with L&T selling its cement business to the Birlas which was later rechristened UltraTech. L&T shares ended 3.8% higher at Rs 1,633.65 on the BSE on Wednesday.
Source: Economic Times