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Camlin Goes To Kokuyo at Rs. 110


Camlin’s announced that they will sell stake at Rs. 110 to Kokuyo S&T, Japan. Kokuya is big on stationery, furniture and lifestyle retail – they make revenues of over $3.2 billion. (In comparison, CAMLIN is a tiny company – consolidated annual turnover of 358 cr. and a profit of 8.5 cr.)

There are three phases of the transaction:

1) Immediately (meaning after June end) Kokuyo gets 69.34 lakh shares at Rs. 85. That’s about 10% of the post-diluted equity of the company (currently 6.11 cr. shares).

2) Purchase of 20.3% (23% of current capital) from promoters, who currently own 38%, which according to (1) goes down to 35%. This happens at a price of Rs. 110.

3) Because this triggers open offer guidelines, Kokuyo will buy another 20% from the general public at Rs. 110 a share.

Effectively,  Kokuyo gets 50%+ of the company and that’s where it might stop. The deal values CAMLIN around 700 cr. which is about 2x sales and 80x earnings. Which sounds high, but honestly CAMLIN can make a lot more profit with the fabulous distribution network and product range it has, and if it scales up into premium stationery.

The Dandekars, the brothers in the family that started Camlin in 1931, will retain about 14% stake in the company, assuming they don’t tender shares in the open offer.

CAMLIN ended today at Rs. 81. Much of the above news has already been discounted into the price:

CAMLIN price

At the point of the open offer, Kokuyo will own about 30%. Since they’ll buy at least 20% of the remaining 70%, you can assume that around 1/3rd of your shares will be bought at Rs. 110. The price, untill the open offer date ends, will adjust accordingly. Remember, though: Kokuyo can buy more if they want to.

(See also: Post at VC Circle)

The first time I noticed was when the stock went up (See my Short Takes at MarketVision) around 13 April and now it recently crossed the last high made then. There was a fake fall and the MACD went negative for a while – I sold about half my shares, but managed to claw back in. Though honestly, the gain’s only about Rs. 20, if the stock settles at Rs. 85, which is around 30% in a couple months. Not bad if I hadn’t had to get rid of half of my shares (at just below cost).

Sometimes it looks like prices talk before the news comes out.

See also: Kokuyo’s Press Release. They talk about:

  • Bringing the Kokuyo stationery products to the Indian market. Camlin has 150K distributors, and Kokuyo/Camlin have been doing joint test marketing of notebooks which gave Kokuyo the idea of the strength of the network.
  • Selling products of other European/American/Chinese stationery manufacturers in India.
  • Selling Camlin products abroad in Asia.
  • Making new products.
  • Increase margin by doing more JIT type of inventory management and distribution/logistics that Kokuyo does.
  • They want to get only 50.3% in total (they assume they can only take 20% in an open offer – they can take more of course, but I presume this is where their appetite ends)
  • No debt: Cash reserves to fund this acquisition (365 cr.)
  • Time frames: September to get shares from promoters, after the open offer ends. Should be complete by Dec. 2011 quarter.

31/May/2011: Stock opens around 83 and is lacklustre. There may be potential in this share, but the horribly competitive industry and low margins scare me. Though because of the open offer the floor may be established. The play right now is simply to wait. 


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