Calcutta, Oct. 9: Berger Paints (India) Ltd has entered into an agreement with Snowcem (India) Ltd to acquire its paints business “subject to successful completion of further negotiations and due diligence”.
Berger has appointed a merchant banker to conduct the due diligence exercise. Officials are unwilling to reveal the name but said it would submit its report within a month-and-a-half.
The agreement was signed on Tuesday evening, both Berger and Snowcem informed the stock exchanges today.
The notices sent to the bourses by the two companies said they had signed a “non-binding term sheet”, implying that the two companies could withdraw if they did not agree on the deal.
Snowcem earned Rs 106 crore in net revenues last year. Berger officials said the company intended to buy out Snowcem’s three production units along with its employees, and the brands.
Snowcem’s plants are located at Gotan in Rajasthan, Sinnar in Maharashtra and Gummidipundi in Tamil Nadu. The company has a distribution network of 3,000 dealers. Besides the assets, Berger will also assume the liabilities of Snowcem’s paint business.
Though both the companies are tight-lipped about the consideration that Berger may have to pay for the acquisition, industry observers said they expected it to be in excess of Rs 100 crore.
Snowcem is a key player in the cement paint market. It leads the market with a 26 per cent share. Other variants of Snowcem’s decorative paints are not as strong as its cement-based paint. Berger, too, has a strong cement-based paint brand, Durocem. The acquisition will strengthen Berger’s position in the economy paint market.
Berger acquired ICI India’s automotive paint business in the recent past. To start with, ICI’s automotive paint division was turned into a 50:50 joint venture with Berger. After successful transition of the business from the management of ICI to Berger, the former pulled out. After the takeover, Berger emerged as a leading player in the automotive paint business.