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ITC boards Wimco's Ship
The Financial Express - 02 Jul 2005

Acquires Swedish Match's 74%, doubles market share to 25%

KOLKATA

Cigarettes to hotels major ITC Ltd on Friday has picked up the largest matchboxes maker in the organised segment, the 81-year-old Wimco Ltd, a unit of global major Swedish Match AB. ITC's wholly-owned subsidiary Russell Credit Ltd has acquired Swedish Match's 74% stake in Wimco. It would pick up a further 1 million shares later, to end up with a 76% stake. While Swedish Match holds 74% in Wimco, public shareholding is 15.47% and the balance is with banks and institutions.

The Wimco stock surged 4.13% on Friday to close the day at Rs 53 on The Stock Exchange, Mumbai (BSE), as compared to its previous close of Rs 50.90, with trading volumes of 8.12 lakh shares. With this acquisition, ITC will gain control of a mechanised capacity of 5 billion matchboxes a year, giving it huge room to manoeuvre in the market. It proposes to delist Wimco from the bourses in due course.

ADDING FIRE

  • ITC's present market share with AIM: 12%

  • With SHIP (post-acquisition): 25%

  • Wimco will add 5 billion matchboxes a year capacity

ITC had entered the segment with its Aim brand three years ago by tying up with small scale units and helping them upgrade technology and design. It's annual report does not give the volumes of safety matches sold since these are manufactured by third parties.

Aim is already the largest in the market, with a 12% share, capitalising on the edge given by lower costs of third-party manufacture sans excise. Wimco's Ship was a few decimals behind, but the company itself has accumulated a loss of around Rs 60 crore. It had recorded a turnover of Rs 123 crore in 2004-05. With a 25% market share now, ITC will use a ladder strategy to offset the handicap of owning a mechanised player, company officials said.

Meanwhile, Swedish Match, in line with a 2002 order by the Securities & Exchange Board of India (Sebi), is making an open offer to acquire a minimum of 20% of the publicly held shares of Wimco, with the aim of selling these shares. The open offer is proposed at Rs 35 a share and accrued interest thereon of Rs 24.24 a share.