French stationery major BIC Group is going ahead with the final leg of a pending Rs 790 crore ($160 million then) deal to buy a significant minority stake in domestic stationery maker Cello Group’s writing instruments business. This follows a favourable international arbitration award last year after Cello sought to scrap the deal one year after signing it four years ago.
The deal, announced in January 2009, involved BIC Group acquiring 40 per cent stake in seven entities representing writing instruments business of the Cello Group, separately, for a total of Rs 790 crore.
As part of the agreement, BIC Group also got a call option in 2013 to increase its stake to 55 per cent at a price based on a formula tied to earnings.
The French firm completed stake buy of 40 per cent in six of the seven entities for Rs 380 crore.
However, in January 2010, Cello management proposed to the BIC Group to unwind and terminate the definitive agreements signed a year ago. BIC Group declined to do so and initiated international arbitration proceedings in August 2010 to complete the acquisition of 40 per cent of the seventh entity namely Cello Pens, the flagship unit.
Cello Pens is India’s largest manufacturer and distributor of writing instruments.
BIC Group received a favourable award in February 2012 from the tribunal constituted under the rules of the Singapore International Arbitration Centre for the pending leg of the stake buy in Cello Pens. Following this, it filed a petition before the Bombay High Court seeking the enforcement of the arbitral award in May last year.
“BIC Group and Cello Group have jointly filed an agreement with the Bombay High Court to allow BIC Group to acquire the remaining 40 per cent of the last stationery entity of Cello Group. The court after reviewing the filling has rendered the agreement enforceable. The agreement provides for closing before the end of 2013 based on the original term and conditions,” a statement issued by BIC Group on Monday said.
BIC Group has a call option to increase its ownership in Cello Pens from 40 per cent to 55 per cent by October 2013.
Given that BIC Group is to pay the balance Rs 410 crore for the seventh entity, the depreciation of Indian currency in the meantime means the deal value in dollar terms would have come down by around $5-10 million, not factoring in the cost of arbitration and other legal fees in India.
Cello was founded in 1995 by the Rathod family. According to its website, the writing instruments firm is part of Rs 1,000 crore Cello Group.