Larsen & Toubro (L&T) will vote with Grasim Industries in the demerged cement company UltraTech Cemco till it exits the company in 2009. This is significant because after Grasim Industries’ open offer for an additional 30 per cent stake, L&T will be the third largest shareholder in UltraTech Cemco, with a 11.5 per cent stake, after the AV Birla group flagship (51.1 per cent) and the financial institutions together (16.5 per cent). Had L&T not decided to vote with Grasim Industries, L&T and the Financial Institutions would have been in a position to block special resolutions by virtue of holding over 26 per cent of the cement company’s equity.
The notice for the open offer further said: "Grasim and L&T have entered into a deed of covenant, which provides, upon the acquisition of management control, for divestment by L&T not later than December 31, 2009 of its balance shareholding of 11.5 per cent in Ultra Tech and the manner in which such divestment would take place." L&T currently holds a 20 per cent stake in UltraTech and is not entitled to participate in the open offer. After the open offer is completed, L&T will sell 8.5 per cent of its stake to Grasim, enabling the Birla company to acquire management control in the cement company with a majority stake of 51.1 per cent.