Ericsson has decided to exit its cable joint venture with MP Birla Group by divesting its entire stake to the Indian promoter.
The company has signed agreements with Birla Corporation, the flagship of the group, Vindhya Telelinks and other group investment firms to sell a 27.5 per cent stake (82.5 lakh shares) in Birla Ericsson Optical for Rs 28 apiece.
The Indo-Swedish joint venture was established in 1992 to manufacture and sell telecommunication cables consisting of both copper, optical fibre and other types of speciality wires and cables. It supplies to both the domestic and overseas markets.
"Ericsson had exited the cable business globally a few years back. In line with that strategy, it wanted to be out of this joint venture too. We were in discussion for this transaction for a while," an official of the MP Birla group told The Telegraph.
The Birla group has been managing the JV for sometime as Ericsson did not even have a member on the board for over a year.
"It is a profitable venture having the latest technology. We don't intend to have a partner going forward," the official added.
The proposed acquisition is expected to be complete by September 30, 2016. The Birla Ericsson Optical share went up 4.89 per cent to touch Rs 39.70 on the BSE.
The stake of Birla Corporation, a promoter in Birla Ericsson Optical, will go up to 17.96 per cent from the existing 3.13 per cent after buying 44.5 lakh shares.
Vidhya Telelinks, another promoter, will buy 18 lakh shares amounting to Rs 5.04 crore. Following this acquisition, its stake in the company will increase to 19.33 per cent from 13.33 per cent.
Promoter Universal Cables, which holds a 13 per cent stake, is not acquiring any additional shares.
The rest of the shares of the JV are being bought by other MP Birla group firms, making up the deal valued at around Rs 23 crore. - Telegraph India