Grasim, L&T strike deal to skirt open offer

Aditya Birla group flagship Grasim Industries has arrived at an informal understanding with Larsen & Toubro to offload 14.95 per cent out of the 15.74 per cent stake it holds in the engineering company to L&T's employees' trust.

The deal will enable the L&T employees' trust to skirt the mandatory open offer had it bought out Grasim's entire stake.

According to the arrangement, Grasim, following the demerger of L&T's cement business, will sell the stake to the L&T employees' trust at Rs 120 per share.

"We will be offloading about 14.95 per cent of our stake in L&T, since that is what the L&T trust has asked us to do. We have not yet taken a decision on what will be done with the remaining stake," Grasim executives told Business Standard.

The Birla nominees on the L&T board "" Kumar Mangalam Birla and his mother Rajshree "" had been expected to step down after Grasim sold its entire stake, but they may consider continuing if the L&T board asks them to stay on.

Grasim, along with its 100 per cent subsidiary Samriddhi Swastik Holdings, holds 15.74 per cent in L&T. Grasim's stake in L&T has declined from 15 per cent on September 30, 2003, to 14.85 per cent on December 31, 2003.

However, company sources confirmed that the Birlas' total stake remained at 15.74 per cent.

The outgo of the L&T employees' trust for the purchase of Grasim's stake is also likely to be reduced from Rs 470 crore, since the sale will include only 14.95 per cent, 0.8 per cent less than the original plan.

As per the original arrangement between Grasim and L&T, Grasim is to buy an 8.5 per cent stake in Ultra Tech Cemco, L&T's demerged cement division, for Rs 171.30 per share, after which Grasim will make an open offer at the same price for 30 per cent of the equity of Ultra Tech Cemco.

If the open offer is fully subscribed, Grasim will become the majority shareholder in Ultra Tech CemCo with a 51 per cent stake.