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Demerger is a form of corporate restructuring in which the an entity's business operations are segregated into one or more components

It is the converse of a merger or acquisition.A demerger can take place through a spin out by distributed or transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which then that company's shareholders are issued shares ofDemergers can be undertaken for various business and non-business reasons, such as government intervention, by way of anti-trust law, or through decartelization.[2 Wockhardt demerges subsidiary's nutrition biz -*Wockhardt Ltd, a pharma major, has approved the demerger of nutrition business of Vinton Healthcare, a wholly-owned subsidiary of the company into Wockhardt. This will be effective from 1 January, 2011.The decision was taken today by the company in its board meeting to consider and approve the scheme of amalagamation..- Markets languish in latenoon trades - Copper futures rise on pick up in demand - Acer launches new range of AspireS3 'Ultrabooks' - FCCBs offer opportunities for capital appreciation: BNP Paribas - Hanoi-based bank picks Polaris platform to streamline ops "As Vinton Healthcare Limited is a wholly-owned subsidiary of the company, no shares would be issued by the company pursuant to the Scheme of Demerger," said Wockhardt in a statement today. Demerger Impact Cement business to go to Samruddhi Kumar Gautam PRINT SHARE COMMENTS Grasim Industries, an Aditya Birla group company, took another step towards consolidating its cement business by deciding to demerge it into its wholly-owned subsidiary Samruddhi Cements .Demerger design-Under the proposed demerger, the company will transfer its cement and related business, except its investments in UltraTech Cement, to Samruddhi Cements. In return, Grasim s shareholders will receive one equity share of Samruddhi for each share of Grasim Industries they hold. After this share transfer, shareholders of Grasim Industries will hold 35 per cent of total equity in Samruddhi Cements while the rest will be controlled by Grasim Industries. Samruddhi Cements will be listed after this merger.

Objective The demerger is expected to accomplish many objectives. After the demerger, shareholders can take direct exposure to the cement sector by holding shares of Samruddhi Cements. At present, shareholders of Grasim Industries have exposure in textile and chemicals business too, which forms around 30 per cent of the company s revenue.Most importantly, the merger with Samruddhi Cements is expected to create a platform for further merger of Grasim s cement business under Samruddhi Cement into UltraTech Cement. In 2004, Grasim had acquired majority stake in UltraTech Cement by buying engineering giant Larsen & Toubro s holding in it.

Shareholder impact The shareholders do not seem to have welcomed this move. In a week of the announcement on 3 October 2009, Grasim s share price dropped 11.70 per cent from Rs 2,650 to Rs 2,399.Says a research report by financial services firm Angel Broking: Currently, since both Grasim and UltraTech are operating at optimum levels, we do not see any significant value accretion out of the deal. Grasim s share price will also be impacted by other concerns surrounding the cement sector. A large capacity expansion by cement companies in future could create oversupply which would put downward pressure on cement prices and the profit margins of the cement companies may drop.