Engineering and construction major Larsen & Toubro (L&T) will fully exit the cement business by selling its 11.5% stake in the Aditya Birla controlled UltraTech Cement by December 2009. The stake will be valued at Rs 800 crore ($160 million) at Friday's market price thought it may well ask for a premium for selling a large stake in one of the top five cement companies in the country.

L&T would have to sell its stake by the year-end under the terms of an agreement with Aditya Birla group firm Grasim, signed in 2003. The agreement brought to an end an epic corporate battle, during which Grasim made an open offer for L&T. The battle ended with L&T selling its cement business to the Birlas.

According to a report in The Economic Times, Birla group enjoys the right of first refusal on its stake in UltraTech but L&T can offer it to a third party if the Birla group doesn’t buy. Birlas and L&T are yet to speak on the issue even as Birlas are said to be the prime candidate for the stake to consolidate their holding.

This would mean a final exit from cement for L&T, which is also looking to sell some other non-core assets. L&T wants to pull out of businesses which are at sub-Rs 500 crore ($100 million) in revenues. One exception is the medical devices business which is no longer on the block as L&T failed to get the 'right price'. The firm is now investing in the business to make it a Rs 500-crore plus unit.

The Aditya Birla group company Grasim, took over Reliance Industries' stake in L&T and raised it further to 15.73% triggering an open offer. L&T resisted the takeover attempt, by spinning off its cement division (believed to be the key reason for Birlas interest in L&T). This spun off unit was later rechristened as UltraTech and sold to Grasim as a part of a compromise deal which in turn involved Grasim selling its 14.95% stake in L&T to L&T Employee Welfare Trust. In an independent transaction after restructuring, L&T picked up an 11.49% stake in UltraTech Cement.

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