Caroborundum objects to global deal of partner Wendt's parent

Dec. 20, 2010 - 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 Rs 56-crore Wendt India, a company that manufactures super abrasives, is a joint venture of Carborundum Universal and Wendt GmbH. The latter is a subsidiary of Winterthur Technologies.
As such, the acquisition of a controlling stake in Winterthur Technologies by 3M of the US which already has operations in India in the same field amounts to indirect acquisition of stake in Wendt India by 3M, contends Carborundum Universal.
Carborundum, part of the Chennai-based Murugappa group, holds 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 exchanges today, 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.
This is the third time that Wendt GmbH is being sold in five years. In 2005, the company was sold by its promoters, Anglo American plc of the Boart Longyear group to a private equity, 3i, for 86 million. In 2007, Winterthur Technologies, promoted by one Dr Edgar Rappold, bought Wendt from 3i for 100 million. Last week, it was announced that Winterthur Technologies the parent company of Wendt GmbH would be bought by the US multinational, 3M, for $448 million ( 340 million).
The uncertainty over the ownership of the overseas partner, Wendt GmbH, has affected the operations of the Indian joint venture, Wendt India, Murugappa group's officials have noted many times in the past.
Wendt India's turnover has stagnated in the Rs 50-crore range in the past several years.
3M's abrasives business in India was about Rs 178 crore last year (all kinds of abrasives, as opposed to only super-abrasives of Wendt.)