Grindwell shareholders bring Saint Gobain merger to a halt

Written by fe Bureau | Mumbai | Updated: Dec 6 2013, 06:30am hrs
The merger between Grindwell Norton (GNO) and group company Saint-Gobain Sekurit India (SGSIL) has fallen through after shareholders of GNO voted against the resolution to merge the two companies, reports fe Bureau in Mumbai.

According to a lawyer from a financial sector law firm, the postal decision can be challenged in the high court by the company if the resolution is passed in the court-convened meeting. However, the chances of the company winning the case would depend on the merits of the case, he said.

Shares of Saint-Gobain crashed 11.6% to end at R12.81 on Thursday while shares of GNO fell marginally by 1.2% to R271.7. According to the proposed scheme of amalgamation, shareholders of SGSL are to receive one share of GNO for every 17 shares of Saint-Gobain held by them. Notably, Saint-Gobain's offer to delist last year, too, was unsuccessful as the sharedolders pushed up the price of the delisting offer to R90 from the original floor price of R31, compelling the company to back out from the delisting bid.

According to the details submitted to the exchanges, 60.4% of public shareholders and 94% of public institutional shareholders of GNO voted against the resolution. Analysts reckon the high percentage of public shareholder voting indicated that some large groups of public shareholders had collectively voted against the proposal.

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On the other hand, 24.09% of SGSIL shareholders voted against the merger proposal.

Interestingly, proxy advisory firm IiAS advised shareholders to vote in favour of the GNO merger with its three group companies, including Saint-Gobain. IiAS was not in favour of GNO buying SGSIL since it had lower profits in FY13 and operated in a different space (manufacturing and trading of automotive glass).

However, IiAS had observed that GNO's total income and net profit would increase by 39% and 16% respectively, its earnings per share would decrease marginally by 10%, and the valuation of GNO would broadly remained unchanged if GNO chose to merge with SGSIL and the other two group companies two group companies SEPR Refractories India (SEPR) and Saint-Gobain Crystals and Detectors India (SGCD). The proxy advisory firm also believed that GNO could achieve operational synergies with SEPR and SGCD, which were part of the same division (High Performance Materials Division) as GNO.

In April, the announcement of Saint-Gobain's plan to merge with group firm Grindwell Norton (GNO) had led to a sell-off in the shares of Saint-Gobain, which had hit the lower circuit at Rs 24.75.Saint-Gobain Sekurit made a net profit of Rs 0.65 crore in FY13 compared with GNO's net profit of Rs 97 crore.