ITC's proposed acquisition of 51% stake in packaging major Rollatainers is in question. ITC top brass seems to be rethinking on the pros and cons of this deal.
ITC Limited has interests in tobacco/ cigarettes, hotels, paper and packaging. It is also one of India's largest foreign exchange earners (FY99 Forex inflow: Rs 6.5 bn). ITC has a presence in the paper/packaging segment through ITC-Bhadrachalam Paperboards. The company had recently announced buy out of a majority stake in Rollatainers for a consideration of Rs 250 m, with the aim of becoming one of the largest paper packaging companies in the entire middle east Asia.
However, there were serious differences between the two companies over the price of the acquisition. It seems both parties were unable to agree on profit and loss accounts as a result of which they are unable to arrive at an agreeable price of acquisition. Rollatainers had originally finalised a preferential allotment of 7 million shares at Rs 35 per share to ITC. Meanwhile, the stock price of the company steadily moved up on the bourses, leading to a disagreement on valuations between ITC and Rollatainers.
Though the deal is not entirely off, it has definitely soured relations between the two companies. If the deal does go through, in spite of the current imbroglio it will be mutually beneficial for both companies. Rollatainers can make use of ITC's financial muscle to market its products in the overseas market. In particular, it can focus on expanding its liquid food packaging business, which it believes, has great potential. The company will make use of ITC's resources to upgrade and export technology and set up manufacturing facilities for sophisticated packaging formats.
ITC, on the other hand, will benefit from Rollatainers understanding of the packaging intricacies and the goodwill it enjoys in the market. This combining of ideas and resources is aimed at increasing the company's high-end product portfolio and hence, improving returns on investment.
ITC Ltd has announced third quarter results of the financial year 2016-2017 (3QFY17). The company has reported 4.7% YoY and 5.7% YoY growth in revenues and net profits respectively. Here is our analysis of the results.
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