Carborundum Universal India apparently unhappy with Winterthur Sale to 3M
21 December 2010
According to reports in the Indian press, Carborundum Universal India has said that the acquisition of controlling interest in Winterthur Technologies AG of Switzerland by 3M is in breach of the shareholder agreement between Wendt GmbH and Carborundum Universal India Ltd. The concern lies in the fact that Wendt India, a superabrasives company, is a joint venture of Carborundum Universal and Wendt GmbH. The latter is a subsidiary of Winterthur Technologies.
The acquisition of a controlling stake in Winterthur Technologies by 3M, which already has operations in India in the same field, amounts to indirect acquisition of stake in Wendt India by 3M, contends Carborundum Universal Industry, which ispart the Murugappa group. Further, it contends that it has the “first right of refusal”, i.e, if Wendt GmbH wished to exit the Indian joint venture, it had to offer its stake first to Carborundum.
In a notice to the stock exchange on 20 December, Carborundum today also said that India’s foreign direct regulations prevent a foreign investor from having investments in more than one entity engaged in the same field of activities, where one of the entities is a joint venture partnership, unless the prior consent of (i) the Indian joint venture partner and (ii) the Foreign Investment Promotion Board ("FIPB") has been obtained.
“In this regard, it may be noted that 3M has an existing operation in India engaged in the same field of activities as the Company. Carborundum has also informed the Company that it has not been approached for consent for the Transaction and that it has categorically withheld consent to the Transaction,” the notice says.
Wendt GmbH has already been sold three times in the last five years. In 2005, it was sold to to the private equity group, 3i, for €86 million. In 2007, Winterthur Technologies, bought Wendt from 3i for €100 million and now 3M has offered to buy the company for €340 million.