Kolkata: Uttar Pradesh-based Balrampur Chini Mills Ltd is likely to cede control of its 10 sugar mills to key rival Bajaj Hindusthan Ltd, two people familiar with the negotiations said.
If the deal goes through, it would make Bajaj Hindusthan the second largest sugar maker in the world after Brazil’s Copersucar SA.
A person aware of the plans of Vivek Saraogi, Balrampur’s managing director, said talks are under way on the biggest merger and acquisition in India’s sugar industry, “but nothing has been finalized as yet”.
Another close associate of Saraogi confirmed the development. Both spoke on condition of anonymity.
Saraogi declined to comment.
The second person said the deal is being structured in a way that India’s takeover code is not triggered and Bajaj Hindusthan does not have to make an open offer to acquire an additional 20% stake in Balrampur from the market.
Balrampur’s mills are likely to be spun off into a separate company, and the newly created firm transferred to Bajaj Hindusthan in an “all-stock deal”, said a Kolkata-based stockbroker close to Balrampur. “The deal, if structured like this, could be exempt from the takeover code,” he said but declined to be named.
On Friday, the Balrampur scrip opened at Rs160 on the Bombay Stock Exchange, almost 5% higher than Thursday’s close, driven by a report on CNBC-TV18 news channel that Saraogi and his family might sell their 36.37% stake in the firm. The stock went up to Rs167 but closed at Rs149.30, 2% lower than Thursday, while the benchmark Sensex index closed 1% lower at 15,896.
If Bajaj Hindusthan acquires the Saraogi family’s 36.37% stake, valued at Rs1,405 crore at current market price, it would have to make an open offer for an additional 20% of the firm’s shares in keeping with Indian takeover laws.
Bajaj Hindusthan operates 14 mills in Uttar Pradesh, 10 owned directly by it and four by a subsidiary, Bajaj Hindusthan Sugar and Industries Ltd.
In the year ended 30 September, 2008, Balrampur had posted a revenue of Rs1,475.56 crore and a net profit of Rs97 crore. Due to firm sugar prices, the company’s revenue in the nine-month period till June rose 25% over the same period last year to Rs1,324.62 crore. Net profit for the period more than doubled to Rs183.78 crore. Sugar firms count their year from October.