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BUSINESS
Read other articles on the controversy:
The Priyamvada Birla will
controversy timeline, updated daily
Family vs. Outsider :
Viewpoint
Camp Birla: Unity or diversity?
BIRLA'S LAST BATTLE
As the Birlas take on RS Lodha in what promises to be a long-drawn succession battle for the MP Birla estate,
Dancewithshadows.com
gives you a peek into AV Birla group chairman Kumar Mangalam Birla's last war of wills
JM
 It has been three hectic years for him and all the way through, Kumar Birla never lost his will. Since 2001, The Battle For L&T raged through the stock markets, corporate corridors and regulatory verandahs, and it was finally the tough Birla who took the victory stand. Verdict was final and thumping: Camp Birla wrested victory in what was the country's latest high-profile corporate takeover battle after Dhirubhai Ambani's legendary battle for Bombay Dyeing much earlier.
The story begins in the 1980s, when the Reliance group acquired a 10% stake in Larsen & Toubro, set up by Holck-Larsen and Kristian Toubro in 1923. L&T specialised in engineering contracts, and much later, diversified into cement, infotech and other segments. A professionally-managed bluechip company, the promoter stake in the company was always very low, making it vulnerable to hostile takeovers. At one time, public financial institutions like LIC and UTI held a combined stake in L&T as high as 40%.
More than just the 10% stake, Reliance aspired for control of the engineering major. This attempt came unstuck in the face of regulatory and shareholder oppositon, including from financial institutions. Reliance finally bowed out by selling its stake.
The day Reliance announced its decision to move out, the L&T stock shot up on the bourses. Later, it emerged that the entire L&T stake offloaded by Reliance was mopped up by L&T's cement rival Grasim, the Aditya Birla group flagship. It was rumoured that someone got wind of the impending stake sale of Reliance in L&T and bought L&T shares from the market to cash in later. Also, it was rumoured that Reliance had bought L&T shares before selling the enire stake to
Grasim.
The higher stake of Grasim in L&T enabled Grasim to place two of its nominees on L&T board.
According to Sebi's takeover code norms, the acquirer company (Grasim) is supposed to make an open offer to the shareholders of the target company (L&T) at the average prevailing stock price of the company in the last 26 weeks. The price at which Grasim purchased the Reliance stake in Grasim was Rs 304/share. But by the time the open offer came up, the L&T stock was trading much cheaper and the Birlas could make a bid for the additional stake in L&T (Held by shareholders) at a much cheaper price. Small shareholders cried foul and moved heaven and earth to make Kumar The Raider pay more - the same Rs 304/share it paid Reliance. The Grasim chairman stuck to his guns, since technically, Grasim did not have to pay the high price now. The matter went to Sebi and later, all the way to the Securities Appellate Tribunal (SAT). Sebi initially stalled the open offer, but it was reversed by SAT. The Grasim open offer was finally cleared, paving the way for Birla to acquire additional stake and acquire managment control of the once-independent L&T.
There were also several interest side shows to the drama. L&T feared losing its independece and distrusted a takeover by rival Grasim. L&T tried to hive off the cement division into a separate company in an attempt to make the main company unattractive for takeovers and also to divest the cement business to a 'trustworthy' buyer, possibly a foreign partner like Lafarge, looking for capacity expansion in India. But these attempts never bore fruit.
Birlas also roped in S Gurumurthy to get the L&T management on its side. The ice of distrust had to be broken. The L&T management, after all the kicking and screaming, finally gave in, its battle lost.
The actual takeover of L&T shares was itself a complicated process involving L&T demerging its cement business into Ultra Tech Cemco and Grasim making an open offer for it. The stakes were transferred between employee and family trusts in a dizzying 3-layered share transaction, ending with Grasim holding the majority stake. All sections of shareholders -- FIs and small shareholders -- participated in the open offer.
Kumar Mangalam Birla became the Master & Commander at Cemco and assumed the high seat of its chairmanship. The Birla flag fluttered high over the erstwhile cement bluechip. The long and closely-fought battle had drawn to a close.
The dust had barely settled when Priyamvada Birla received her summons from the heavens, leaving Rs 5000 crore of her assets to trusted aide Rajendra Lodha in a contested will. The Birla barons drew the swords. The bugles were blown. Kumar Mangalam's second battle for takeover had just begun.
JM
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