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Wednesday, December 17 1997

Cutfast Abrasives merges with CUMI at 5:1 swap

OUR BUREAU

CHENNAI, Dec 16: The swap ratio for the merger of Cutfast Abrasive Tools Ltd with Carborundum Universal Ltd (CUMI) has been fixed at 5:1-one share of CUMI for every five shares of Cutfast Abrasives with the merger effective from April 1, 1997. The shares of CUMI were trading at Rs 81 levels while that of Cutfast was changing hands at around Rs 15 on Monday.

The scheme also includes merging of Cutfast Polymers (P) Ltd (swap ratio - 7:2), Eastern Abrasive Ltd (9:4) and Carborundum Universal Investments Ltd with CUMI.

The boards of directors of the two companies, on Monday, approved the merger and the swap ratio evaluated by ICICI Securities and Finance Ltd.

The merger will now make CUMI the largest player in the abrasive industry - both in coated and bonded segments. It will also help in more focussed planning of production, marketing and distribution while at the same time minimising the fixed costs and cost of inter-company transactions. The company has decided to retain the brands of Cutfast as they have a good brand identity in certain specifications.

The merger between CUMI and Cutfast was on cards ever since CUMI acquired controlling interest (56 per cent) by buying out the erstwhile promoters and making an open offer to the public in February-March 1996, through two group companies at Rs 100 per share.

Explaining the rationale for the delay, CUMI joint managing director MM Murugappan said they wanted to improve the performance of Cutfast as a stand-alone company. From a loss of Rs 1.77 crore in 1995-96 the company had improved its performance to post a profit of Rs 1.79 crore in 1996-97. For the first half of 1997-98, it has posted a profit before tax of Rs 0.61 crore, he added.

CUMI, earlier this year, transferred the shares from the group companies into its books at Rs 100 per share. By this merger, its 56 per cent holding in Cutfast would get cancelled and consequently the post-merger capital of CUMI would go up by only four per cent Rs 11.54 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.

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