In an interesting twist to the $448-million takeover of Swiss-based Winterthur Technologies AG, the parent company of Wendt India, by US-based 3M, the Indian subsidiary today filed a statement with BSE saying that the proposed indirect acquisition would amount to a breach of FDI regulations in India.
Stating that the company was not informed officially about the proposed acquisition, Wendt India said, the company came to know about it (the acquisition) through press releases and the official websites of Winterthur Technologies AG and 3M, USA.
In its statement to BSE, it said, Carborundum Universal Ltd (CUMI), a 40% shareholder in Wendt India, has notified the Company that the potential indirect acquisition of Wendt India shares by 3M, through the acquisition of shares of Winterthur, ‘constitutes a breach of the shareholders' agreement executed between Carborundum and Wendt GmbH’, a subsidiary of Winterthur.
According to the agreement, Carborundum has been vested with a first right of refusal to buy the Wendt India shares, the statement said.
The statement further said that Carborundum has stated in its notice that the potential indirect acquisition of Wendt India shares by 3M would amount to a breach of the Foreign Direct Investment regulations in India.
The Indian subsidiary of 3M also engaged in various manufacturing activities including superabrasive grinding wheels and tools.
According to the notice, FDI regulations prevent a foreign investor from having investments in more than one entity engaged in the same field of activities, where one of the entities is a joint venture partnership. It is possible only after obtaining a prior consent of the Indian joint venture partner and the Foreign Investment Promotion Board (FIPB), it said.
The company pointed out that 3M has an existing operation in India, engaged in the same field of activities as the Wendt India.
Carborundum has also informed the Company that it has ‘not been approached for consent for the transaction and that it has categorically withheld consent to the transaction’, the statement said.
When contacted, Mukesh Kumar Hamirwasia, the CFO of Wendt India, refused comment. “We have informed BSE whatever one of our promoters has written to us,” he told VCCircle.
Wendt (India), a leading manufacturer of superabrasive grinding wheels and tools (diamond and cubicboron nitride) in India with 35% market share, was incorporated in 1980 as a Joint Venture between Wendt GmbH and The House of Khataus.
In 1991, Carborundum Universal Ltd (CUMI), a $3-billion Murugappa Group Company acquired the Khatau’s stake in the business. Since then WIL has been a 40 - 40 Joint Venture between Wendt GmbH and CUMI. The public holds the balance 20% equity.
An email query to CUMI did not elicit any response till the posting of this story.
3M is a US-based diversified innovative technology devices manufacturer with $23 billion in sales, and employs 75,000 people worldwide, has operations in more than 65 countries including India.
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