HeidelbergCement Group to take over Mysore Cements

Mysore Cements Ltd has announced that the Board and the promoter group of the Company have been working cowards various options for rebuilding net worth of the Company as well as addressing its current debt overhang besides creating growth opportunities for the future. The Company has a nominal cement capacity of 2.095 million MT per annum with operations at Ammasandara (Karnataka), Damoh (M.P.) and Jhansi (U.P.) and sells cement under the well known "Diamond" brand popular in both Central and South India. After a careful review of various possibilities, the Company and the promoter group have decided to enter into a joint venture relationship with the global cement and building materials major HeidelbergCement Group.

Accordingly it is proposed (subject to the approval of shareholders and other necessary approvals) to issue and allot upto 6,65,00,000 Equity Shares to HeidelbergCement Group by way of a fresh issue on a preferential basis to raise long term resources for the Company. The Issue price has been fixed at Rs 54/- per equity share (a premium of over 13% over the BSE closing price of July 18, 2006 and about 23% over the minimum issue price under relevant SEBI rules).

To consolidate the said joint venture relationship, relevant agreements have been entered into between HeidelbergCement Group, the Company and the promoter group. The promoter group will sell 1,34,00,000 shares (at Rs 58/- per share excluding non-compete fees of Rs 14.50 per share) out of their present holdings to HeidelbergCement Group, who will also be making an open offer to shareholders of the Company in accordance with regulations at the above price of Rs 58/ per share (a premium of over 21% over the BSE closing price of July 18, 2006).

Both the promoter and HeidelbergCement groups have expressed their joint resolve to work with the management to further strengthen the Company´s position in the Indian cement sector. The promoter group will continue their full support at the Board level with Sri S K Birla as the non-executive Chairman and Sri Sidharth Birla as Director. The composition of the Board is and will remain compliant with the regulatory requirements and HeidelbergCement Group would nominate others on the Board at the time deemed appropriate.

In effect this proposal enables the Company not only to retain its corporate identity but also raises resources to help it address its debt and capital expenditure needs, besides being able to strengthen its presence in both the Central and Southern market regions. The plan concurrently allows shareholders an opportunity to either exit at a healthy valuation which is at a premium to current market price, or to continue to hold their shares and participate in a strengthened entity with management by a strong global cement player.

SMIFS Capital Markets Ltd and Khaitan & Co., respectively tendered financial and legal advise on the proposal. Ambit Corporate Finance and J Sagar Associates advised HeidelbergCement Group.

Source : Equity Bulls

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