Takeover of Raasi Cements

8/9/2019 Takeover of Raasi Cements

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By

Students Of-

University Of Madras

Chennai


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A combination of two or more companies in which the assets and

liabilities of the selling firm(s) are absorbed by the buying firm.

Although the buying firm may be a considerably different

organization after the merger, it retains its original identity.

When two or more companies consolidate by exchanging common

stock, and the resulting single company replaces the old

companies, the consolidation is described as a merger

A merger is different from an acquisition, in which one companypurchases, or takes over, the assets of another. The acquiring

company continues to function and the acquired company ceases

to exist. Shareholders of the acquired company receive shares in

the new company in exchange for their old shares.

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The purchase of an asset such as a plant, a division, or

even an entire company. For example, the Walt Disney

Company made a major acquisition in 1996 when itpurchased Capital Cities/ABC, Inc., in order to extend its

reach in the entertainment industry

If a company buys another company outright, or

accumulates enough shares to take a controlling interest,

the deal is described as an acquisition.

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Raasi was promoted by Raju and his son-

in-law, N P KR

aju in 1978. Other thancement, the group also had interests in

ceramics and paper.

Raasi's cement division had a capacity of

1.60 mtpa.

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Date established 1946

Locations: Kerala, Andhra Pradesh, Karnataka,

Orissa, Goa, Maharastra

Board ofDirectors and Executives

Vice Chairman : N. Srinivasan

Sr. President : T S Raghupathy

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Analysts pointed out that ICL had strategic advantages in

taking overRaasi. In 1997, ICL added 2.2 million tonnes

per annum (mtpa) new capacity through acquisitions and

expansions.

The addition ofRaasi's 2 mtpa capacity would make itthe undisputed leader in the south of the country. Again,

a Raasi takeover meant automatically acquiring 39.5%

equity in the 1 mtpa Sri Vishnu Cement Ltd. (SVCL),

another Group Company.

The takeover ofRaasi also would help in rationalizationof various markets between ICL and Raasi, and

interchangeable use of Sankar, Coromandel6 and Raasi

brand names.

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By January 1998, Srinivasan had accumulated

18.03% ofRaasi's equity, both through openmarket purchases as well as by buying out thestake of an estranged faction of the Raju family.

In February 1998, Srinivasan announced anopen offer to acquire an additional 20% of

Raasi's equity. He offered Rs 300 per share, 72.41% above the

stockmarket price ofRs 174 on February 26,1998.

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It was believed that SVCL, in which Raasi had a 39.5%

stake, would be a part of the deal.

In 1997, Raasi had convened a couple of board meetings

and its shares in SVCL were divested at Rs. 10 each to

Rajus friends and relations.ICL reported this to SEBI. In august 1998, Raju and his associates announced an

open offer for a 20% stake in SVCL at Rs 25 per share to

increase their share from 39.5% to 60%.

In October 1999, Raju sold his 39.5% stake in SVCL to

ICL, with this ICL acquired 88.55% of SVCL. By the endof2000, SVCL became a subsidiary of ICL.

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Internal

Factors

External

Factors

Strength

S

Weakness

W

Opportunity

O

SO Strategy

ICL was one of the largest

cement producers in south

India.

The company had a strong

presence in the states of

Tamil Nadu, Kerala and

Andhra Pradesh.

WO Strategy

Taking over small cement

industries.

Investing buying shares to

take over.

Market penetration through

the same brand name along

with ICL brand name.

ThreatsT

ST Strategy

Hostile takeover

Takeover is opposed by the

management.

Lot of controversies and

legal proceedings.

WT Strategy

As it has higher share

holdings it settled the

opposition along with SEBI.

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Third largest cement group inIndia with acapacity of14 mtpa

plan to increase capacity to 15.7mtpa by June2010

Largest player inSouth India with 15.4%market share in FY09

Strong brands Sankar, Coromandel andRaasi

Wide spread marketingnetwork

AcquisitionofIndo-Zinc and set-upof1.5mtpagreenfield unit at Banswara, Rajasthan by mid-June, 2010

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Takeover orAcquisition strategy is a

popular strategic alternative adopted by

Indian companies. It suited ICL since long back.

These takeovers strategy suited for ICL for

its leadership position in South India.

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Takeover of Raasi Cements

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