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Our Bureau

For Rs 120 cr at Rs 150 per share; open offer on cards

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Chennai Jan. 23 Coromandel Fertilisers will buy out Indian Farmers Fertiliser Co-Operative Ltd (IFFCO)'s stake in Godavari Fertilisers for Rs 120 crore, the company told the stock exchanges on Tuesday.

Coromandel, part of the Murugappa group, has a 45.07 per cent stake in Godavari Fertilisers Ltd. IFFCO has another 25 per cent — 80 lakh shares.

It has now been agreed that Coromandel will buy the shares from IFFCO at a price of Rs 150 a share. Godavari Fertilisers' share today closed on the BSE at Rs 131.40 — the year's highest — after hitting the ceiling.

Coromandel Fertilisers will now have to make the mandatory open offer to the public to pick up 20 per cent more of Godavari.

Waiting to happen

Murugappa group buying out IFFCO in Godavari was a move waiting to happen, especially after IFFCO bought over Oswal Chemicals and Fertilisers in September 2005.

The group had always said that it was willing to buy out IFFCO, if it was willing to sell.

IFFCO has a tolling arrangement with Godavari — it could supply phosphoric acid and get phosphatic fertilisers in return.

After it took over Oswal, its need for Godavari diminished because it could produce any phosphatic fertilisers at Oswal. Besides, with the shortage of phosphoric acid, no tolling was actually happening. It was, therefore, a question of how much IFFCO would get for its stake.

The Chairman of Coromandel Fertilisers, Mr A. Vellayan, sees the move as two fertiliser companies "helping each other out in the process of consolidation".

He stressed that the transaction was amicable and both parties felt good about it.

Consolidated operations

Experts in the fertiliser industry see a merger of Godavari Fertilisers and Coromandel Fertilisers as `the next logical step'. With the Murugappa group holding over 90 per cent in Godavari — assuming that it would acquire 20 per cent through the open offer — it would make sense for the group to merge the two companies and realise the synergies of consolidated operations.

More Stories on : Mergers & Acquisitions | Fertilisers

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