takeover of raasi cements
TRANSCRIPT
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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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