Nirma acquires Core Healthcare

18th December 2004: The Rs 2,500-crore FMCG major Nirma Ltd has acquired the assets and liabilities of Core Healthcare Limited (CHL), which is counted among the country’s largest defaulters. The deal was negotiated by the Assets Reconstruction Company (India) Ltd (Arcil), where the Core undertakings went to Nirma, the highest bidder. A memorandum of understanding was inked here between Core, Arcil and Nirma, wherein the shareholding and management of CHL will be transferred to Nirma and Nirma would acquire 60% of CHL’s debt component. However, the deal size was not disclosed, as “this would be decided in the coming six months after talks with lenders, shareholders and stake holders.” “In a month, Nirma will carry out a comprehensive due diligence of the affairs of the undertakings of CHL. Subject to satisfactory due diligence, the company has tentatively decided November 30, 2004 as the appointed date for the de-merger of the undertaking for which the company, in due-course, would approach the High Court of Gujarat with a suitable scheme,” Nirma said. Nirma will make a one-time settlement to lenders and other liabilities. CHL and Arcil have made the arrangement to maximise the realisation by lenders, provide shareholders a growth opportunity and to all other stakeholders in the company.

Core is one of world’s leading makers of intra-venous fluids and is the largest player in the Indian IV fluid market with a share of 40% of IV fluids exported from India. CHL chairman Sushil Handa said: “as part of the deal, for initial 30 days, the company will be under a due diligence period. The management will be holding meetings with the lenders and shareholders to think over the residual projects. The execution of the acquisition of CHL will take place in the coming 6 months.” Core’s difficulties began after September 1996, when the debt component turned high. Despite maintaining growth, CHL’s outstandings grew and no solution was reached till date. Narrating the company’s history, Mr. Handa said: “CHL started its operations in 1985 as an IV fluid company, with an initial investment of Rs 4.5 crore and a capacity of 6 million units per year. Sales increased from Rs 2 crore in 1988 to Rs 319 crore in 1998-99. However, the growth strategy was severely hurt due to delayed and high-cost financing and the speed and size of the growth plan. As a stand-alone, first-generation entrepreneurial company, CHL could not absorb the injury leading to a serious setback to its financial situation, operations, performance and image.” He added that during September-October 1996, CHL represented to the top brass of major lenders of the need for pre-emptive action to avoid setbacks. However, for several years, corrective actions were not taken. Also, the lenders as required by the lenders, did not clear certain divestments, which were made at very attractive levels, and therefore the company could not achieve a fresh lease of life from internal resources, he said.

BoI workers oppose Union Bank merger

18th December 2004: The workers’ union of the Bank of India on Friday opposed any move to merge the bank with the Union Bank of India. The Federation of Bank of India Officers’ Association said in a statement that the merger of the two PSU banks would lead to shrinkage of branches in Gujarat and Maharashtra, where these two banks were quite strong. Besides, the merger would result in downsizing of manpower under the guise of rationalisation, association general secretary V Eswaran said. There is no official word on the merger of the two banks, though it is understood that the RBI is examining the Union Bank-BoI merger plans. Union Bank CMD Cherian Varghese had recently said there was need for consolidation in the banking industry.

UB, Seagram lead race for Shaw Wallace liquor unit

17th December 2004: Liquor biggies UB and Seagram are said to be the top contenders for Shaw Wallace’s liquor business. According to industry sources, the MNC giant and the local major could be the main contenders in the fray despite a number of smaller names doing the rounds initially. Liquor industry sources say Shaw Wallace’s liquor division has been on the block after Jumbo, its parent company, asked McKinsey to seek bids for it. Market sources say the buzz around UB’s interest in this strategic investment has sent the group’s Rs 1,250-crore flagship McDowell & Co’s share price zooming, from Rs 75.10 on November 16 to Rs 133.05 today, up 77% in one month. The Shaw Wallace share price too has gone up, though less steeply from Rs 119.10 on November 16 to Rs 160 today, up 34%.

When contacted, a UB spokesperson said, “We are not commenting on that at all.” Ditto for Seagram. When contacted, a company spokesman said: “We regret we would not like to comment on speculative matters that are not necessarily in the public domain.” Shaw Wallace, for its part, too maintained the no-comment line. An official spokesman said: “As a company policy we don’t comment on speculation.” Shaw Wallace Distilleries, the liquor business of Shaw Wallace & Co, is the second largest local spirits company clocking around 15m cases a year. However, it is still a distant second to market leader UB which clocked 35m cases last fisc. The race for SWC’s liquor business is certainly the most keenly watched and strategically crucial deal in the liquor industry in recent times. Analysts say SWC is crucial for UB given that its acquisition will make it a booze behemoth with over a 60% share of the IMFL market.