Henkel Spic''s Calchem deal stayed

The transfer of the Shaw Wallace group's Calcutta Chemicals to Henkel Spic India Ltd. has got stalled. The Calcutta High Court has asked the two groups to put the transfer on hold until it disposes of a writ petition filed by Mr K.D. Pal, who owns 25.7 per cent of Calchem. Henkel Spic is a subsidiary of German chemicals and consumer products maker .

Mr Pal's contention is that the deal is in violation of the takeover code laid down by the Securities and Exchange Board of India. He says he may be deprived of a fair price as a result of the takeover. According to the code, the buyer must offer similar or higher price to the minority shareholders within four days of concluding the deal with the majority stakeholders.

Paul now has three cases running in the Calcutta High Court:

  • One before the division bench of Justices A.N. Ray and D.P. Kundu, who on December 22 last year, stayed Calchem from giving effect to the resolution passed at its extra-ordinary general meeting on June 26, 1998, for handing over management control to Henkel;
  • One before Justice P.C. Ghosh against SEBI;
  • One before Justice P.K. Samanta, who has held that the final order passed on the writ petition against SEBI will be final and binding on all the parties.

Negotiations for the deal began around two and half years ago, when Shaw Wallace proposed to sell its shares in Calchem and Detergents India Ltd. The financial problems of these two subsidiaries were acting as a drag on the liquor major's profitability.

Calchem makes the premium toilet soap Aramusk and the neem-based Margo, Neem toothpaste and Tuhina skin care lotion and has a plant in West Bengal. Detergents India has a plant in Andhra Pradesh where it makes Chek, Super Chek and Regal detergent bars. These will add to the facilities owned by Henkel in Pondicherry.

On 23 January 1999, the two groups concluded the deal for a total consideration of Rs. 51.05 crore. The price: Rs. 267 per share for Calchem and Rs. 51 per share for Detergents India.

The result: Henkel Spic acquired a 65 per cent stake in Calchem and 60 per cent in Detergents India. Only, it will have to wait until March or later when the high court passes its order, before it can begin implementation of the acquisition. The next hearing in the case has been fixed for 19 March.

Paul may compromise, which is evident from the fact that he has agreed to consider the price of Rs.267 per share announced by Henkel in its open offer.
     After signing the deal in the first week of February 1999, Henkel will possess a larger distribution network that will enable it to push higher volumes of its existing products. The wider range of products is also expected to help the company improve turnover and profits.