Grasim and Aditya Birla Nuvo Amalgamation

Abstract

Aditya Birla Group (ABG) announced the merger of Grasim Industries Limited (Grasim) and Aditya Birla Nuvo (ABN), two diversified conglomerates of the business group, in August 2016. ABG also announced the demerger of Aditya Birla Financial Services (ABFS), a 100% subsidiary of ABN, after the merger between Grasim and ABN. First, the stock market did not like the merger as it found it too complicated and the stock prices of both the companies fell drastically during intra-day trade. Holding companies trade at a discount to their net assets values in India and the stock market did not like two holding companies of ABG to merge with each other. Second, some analysts also argued that the merger enriched the shareholders of Grasim at the cost of ABN. The management of ABG was, however, convinced of the merits of the merger. It argued that the surplus cash of Grasim could be used to fund the growth opportunities in ABFS. It also argued that the value unlocking would happen after the demerger of ABFS. The case allows the students to analyse a complicated merger proposal. It also allows to measure the possible synergies from the merger and advise the shareholders on the right course of action.