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Thursday, Oct 10, 2002

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Berger to buy Snowcem paints business — Due diligence process to be taken up soon

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BERGER Paints India Ltd has entered into an agreement with Snowcem India Ltd for formally beginning an acquisition process of the latter's interior and exterior paints business.

Confirming this to Business Line here today, Mr S.K. Biswas, Company Secretary, Berger Paints, said the agreement — a non-binding term sheet — was executed on Tuesday between the CEOs of the two companies in Mumbai.

``Berger Paints would soon start the legal and financial due diligence exercise. This is expected to be completed next month'', Mr Biswas added. The valuation would follow the completion of the due diligence process, Mr Biswas observed.

``Berger is negotiating with Snowcem for buying the assets and liabilities, including brands and production facilities of Snowcem. Thus, the due diligence would be restricted to specific assets and liabilities of the decorative paints business of the company'', Mr Biswas explained.

Mr Biswas, however, declined to name the expert agency, which has already been given the due diligence assignment.

Both companies today informed the stock exchanges regarding the agreement. Snowcem informed the National Stock Exchange that it was in negotiation with Berger "to sell its paints business (including the intellectual property rights)''. It further said the term sheet was subject to the approval of the board and successful completion of the due diligence process.

Berger, which is regarded mainly as an interior paints manufacturing company, will make a big dent in the exterior paints field if the deal is through, according to industry analysts.

Currently, 80 per cent of the company's turnover comes from decorative paints — both interior and exterior. "The contribution of exterior paint items towards decorative sales is estimated to be around 20 per cent'', Mr Anirban Dutta, an analyst with JetAge Securities, pointed out.

According to him, Berger has a share of around 14 per cent of the domestic decorative paints market. It has four exterior paint brands apart from several branded interior paints items.

Snowcem, largely an exterior paints company, has a number of prominent brands such as Snowcem Plus, Sandtex Matt, Sandtex Smooth, Snowcryl XT, Trump and Unigloss. It is a leader in the textured finish market and commands around 26 per cent share of the cement paints market of the country.

The Ruia brothers, Indian promoters of Snowcem, have a total shareholding of 23.12 per cent in the company, while the foreign promoter — George Lillington Co — holds a 17.88 per cent stake.

The Snowcem scrip improved by over 10 per cent on BSE and over 3 per cent on NSE on the agreement news.

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