Slugfest of the year

Last year, when the Ambanis quietly sold their stake in the country's largest cement and engineering conglomerate to Kumar Mangalam Birla making it the deal of the year, little did Birla know that the coming year would end in a different note altogether.

Battle-hardened after years of taking on the Ambanis, the Larsen & Toubro management's resistance against Birla taking control of the company has struck a discordant note in his plan to build a cement behemoth.

Though, there has been little opposition to Birla making an easy entry into L&T's board, the actual battle erupted when Birla made an open offer to acquire an additional 20 per cent in L&T.

The announcement caught everybody by surprise though it was widely expected as the Birlas would have to make the offer sooner or later to give a logical conclusion to their investment of around Rs 950 crore (Rs 9.5 billion) for a 14.4 per cent stake in L&T.

The bone of contention initially was the offer price of Rs 190 a share, as it was around 40 per cent lower than what Birla had paid to buy out Reliance.

Having mastered the art of fending off promoter groups in the past, the L&T top management knew it well that the key to their victory could be nothing else but the support of the financial institutions, till now the largest shareholders of L&T.

In a high drama played out behind the scenes, L&T initially managed to convince the FIs about the negatives of Birlas open offer and his perceived attempt to take control of the company.

The L&T management also announced its decision to demerge its cement business, offload a stake to a financial investor, and even chose to rival Birla flagship Grasim when it put in an expression of interest for Raasi and Visakha Cement.

In short, an all out war against the Birlas. By now, the Birlas were already into a soup with Sebi now playing spoilsport.

In an intriguing decision, Sebi put in the spanner by deciding to investigate whether the Birlas already had management control of L&T.

As a consequence, it forced Grasim to defer the open offer intriguingly. Even the Securities & Appellate Tribunal appeared to uphold Sebi's decision when it chose not to grant an interim relief.

The Birlas felt that L&T's demerger plan against shareholder interest. But L&T feels Birla is only looking at his own interest.

As the year comes to an end, Birla finally appears to have gone one up on the L&T management. The institutions finally seem to be buying his argument and is unlikely to support L&T's plan.

But the opposition is only to the current form of the demerger. If Birla finally makes an offer to take control of the demerged cement company, institutions look likely to support the move.

2002: The Year That Was

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