Mumbai: The agreement between Berger Paints India and Snowcem India over the former acquiring the latter''s paints business has been cancelled due to differences over the valuation of the deal.

NM Rothschild & Sons (India) was advising Snowcem India on the transaction, while Berger India had appointed PricewaterhouseCoopers to conduct the due diligence. The due diligence of the deal was done based on profitability figures of Snowcem''s paints business and its intellectual property rights. The deal ran into rough weather because the two companies could not arrive at a mutually acceptable valuation figure.

In October 2001, the Ruia-owned Snowcem India signed a non-binding term sheet with Berger Paints to sell off its paint business for an undisclosed amount. According to the deal, Berger was to acquire a number of units of Snowcem in Mumbai, Gotan, Sinnar near Nashik and Gummidipundi near Chennai in Tamil Nadu - and the brand, subject to successful legal and financial due diligence. The deal included buying the intellectual property rights to Berger Paints.

The Rs 66.89-crore Snowcem India has been able to maintain its leadership status in the exterior paints industry in India for over four decades even with the entry of some heavy competition in the segment. The company has a large distribution network of over 3,000 dealers. However, in the past few years Snowcem has been under severe financial strain and reported a net loss of Rs 11.58 crore in 2002-03.

The Ruia-managed Snowcem India has brands like Snowcem Plus, Sandtex Matt, Snowcryl XT, Uni-Gloss, Trumph and the recently launched Sandtex Smooth. The range offers complete exterior solutions across the board and covers every price point.

On the other hand Berger Paints'' performance has been good and it registered a net profit of Rs 31.4 crore on sales of Rs 601 crore during 2001-02. The company has emerged stronger in industrial and auto segments after its acquired ICI India''s motor and industrial paints business in 2001. The Rs 601-crore Berger Paints is the third-largest paints company in India after Asian Paints and Goodlass Nerolac.

Berger is also strong in the decorative paints segment and has paints and paint systems for every application - interior, exterior, every surface, concrete, plaster, metal and wood - as well as special applications like water storage.

Berger''s brands include acrylic brands like Luxol Silk and Rangoli for interiors, and Weathercoat for exteriors, among others. The company has four facilities strategically located in the East, West and South of India with an installed capacity of 52,000 MT.

Snowcem''s paint business, which includes exterior and interior paints, would have given Berger a significant presence in the exterior paints sector where Snowcem enjoys around 30-per cent market share, and is the largest player.

But this deal, if it had gone through, would have adversely impacted Berger''s balance sheet because of the high debt burden of Snowcem even though it would have given Berger a foothold in the export markets of Snowcem India such as Sri Lanka.