Kennametal Ltd

Letter of Offer This Document is important and requires your immediate attention This Letter of Offer is being sent to you as an equity shareholder of Widia (India) Limited. If you require any clarifications about the action to be taken, you may consult your stock broker or investment consultant or the Manager to the Offer / Registrar to the Offer. In case you have sold your shares in Widia (India) Limited, please hand over this Letter of Offer and the accompanying Form of Acceptance-cum-Acknowledgement and Transfer Deed to the purchaser of the shares or the member of stock exchange through whom the sale was effected. CASH OFFER (The “Offer”) by Kennametal Inc. Registered Office: 1600 Technology Way, P Box 231, Latrobe, Pennsylvania 15650-0231 USA; .O. Tel: +1 724 539 5000; Fax: +1 724 539 3839 for purchase of up to 5,124,480 fully paid-up Equity Shares representing up to 23.32% of the fully paid-up equity share capital of Widia (India) Limited Registered Office: 8/9th Mile, Tumkur Road, Post Bag 7300, Bangalore 560 073, India Tel : +91 080 839 4321 ; Fax : +91 080 839 4708 at Rs. 76.28 Per Equity Share (the “Offer Price”) and interest of Rs. 3.93 per Equity Share calculated @ 10% per annum from August 31, 2002 till March 6, 2003 i.e. the scheduled date of payment of consideration (the interest amount is subject to change depending upon the actual date of payment) The Offer is being made by Kennametal Inc. in compliance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 1997 as applicable on May 3, 2002 (the “Regulations”). For the purpose of the Offer and in terms of the Regulations, Kennametal Inc. is the “Acquirer”. The Offer is subject to the approval of the Foreign Investment Promotion Board (“FIPB”) and the Reserve Bank of India (“RBI”) under the Foreign Exchange Management Act, 1999 (“FEMA”) for acquiring and transferring the equity shares tendered in this Offer. The Acquirer by a letter dated August 1, 2002 sought clarification from the FIPB whether, in the absence of a no-objection certificate from the Indian partner, Birla Kennametal Limited, the FIPB would permit the Acquirer to acquire shares of the Target Company from the public shareholders pursuant to an open offer made under the Regulations. The FIPB, however, directed the Acquirer to submit a formal proposal for the proposed purchase of the shares of the Target Company as required by the Regulations. The Acquirer, by its letter dated September 6, 2002, submitted a formal application to FIPB for purchase of up to 23.64% shares of the Target Company from the public shareholders and no communication has been received by the Acquirer from the FIPB regarding the application. However, the Department of Heavy Industry, Government of India has sought clarification from the Target Company and from Birla Kennametal Limited regarding their respective products and the Acquirer understands that each of these companies has responded to the clarification letter sent by the Department of Heavy Industry. The Acquirer’s application is currently pending before the FIPB. The Acquirer expects difficulty in getting the FIPB approval because its existing joint venture partner Mr. Yash Birla has twice refused to give a no objection certificate, which is required to be submitted along with the FIPB application. The Acquirer shall withdraw the Offer in terms of Regulation 27 (1)(b) of the Regulations if the FIPB approval is refused. In the event of withdrawal, public announcement regarding the withdrawal shall be made in the same newspapers in which the original public announcement was made as stated in clause 2 on page 3 of this Letter of Offer. There are no other statutory approvals required to acquire Equity Shares that are tendered pursuant to this Offer. In case of nonreceipt of the said approvals within time, Securities and Exchange Board of India (“SEBI”) has the power to grant extension of time to the Acquirer for payment of consideration to shareholders subject to the Acquirer agreeing to pay interest as directed by SEBI. Shareholders, who have accepted the Offer by tendering the requisite documents in terms of the Letter of Offer, cannot withdraw the same. The Acquirer is permitted to revise the Offer Price upward any time up to seven working days prior to February 4, 2003 i.e. the date of the closure of the Offer. In the event of such revision, an announcement to this effect will be made in the newspapers as specified in Clause 2 of this Letter of Offer and the same price would be payable by the Acquirer for all the shares tendered at any time during the Offer. If there is a competitive bid: q The public offers under all the subsisting bids shall close on the same date; q As the Offer Price cannot be revised upward anytime in the seven working days prior to the date of the closure of the Offer, it would, therefore, be in the interest of shareholders to wait till the commencement of that period to know the final Offer Price of each bid and tender their acceptance accordingly. A copy of the Public Announcement and the Letter of Offer (including Form of Acceptance-cum-Acknowledgement) is also available on SEBI’s web-site (www.sebi.gov.in). MANAGER TO THE OFFER JM Morgan Stanley Private Limited 141, Maker Chambers III Nariman Point, Mumbai – 400 021, India Phone: +91 22 5630 3030 Fax: +91 22 2202 8224 Email: piyush.gupta@morganstanley.com Contact Person: Piyush Gupta REGISTRAR TO THE OFFER Karvy Consultants Limited 21, Avenue 4, Street No.1, Banjara Hills, Hyderabad- 500 034, India Phone: +91 40 2331 2454 Fax: +91 40 2331 1968 Email: murali@karvy.com Contact Person: Muralikrishna OFFER OPENS ON: JANUARY 6, 2003 The schedule of activities is as per the following table: Activity OFFER CLOSES ON: FEBRUARY 4, 2003 Date Public Announcement Date Specified date (for the purpose of determining the names of shareholders to whom the Letter of Offer would be sent) Last date for announcement of competitive bid Date by which Letter of Offer to be posted to shareholders Date of opening of the Offer Last date for revising the Offer Price/number of shares Date of closure of the Offer Date by which acceptance / rejection under the Offer would be intimated and the corresponding payment for the acquired shares and / or the unaccepted shares / share certificates will be dispatched/credited. * Subject to FIPB Approval. Friday, November 15, 2002 Friday, November 15, 2002 Friday, December 6, 2002 Thursday, January 2, 2003 Monday, January 6, 2003 Friday, January 24, 2003 Tuesday, February 4, 2003 Thursday, March 6, 2003* TABLE OF CONTENTS Disclaimer Clause ....................................................................................................................................................... Details of the Offer ...................................................................................................................................................... Background of the Acquirer ....................................................................................................................................... Background of the Target Company .......................................................................................................................... Reasons for the Offer and Future Plans ..................................................................................................................... Acquirer’s Current Shareholding ............................................................................................................................... Offer Price .................................................................................................................................................................... Financial Arrangement ................................................................................................................................................ Delisting Option to the Acquirer ................................................................................................................................ Terms and Conditions of the Offer ............................................................................................................................. Procedure for Acceptance and Settlement ................................................................................................................ Complaints/Communications with respect to the Offer ............................................................................................ Documents for Inspection .......................................................................................................................................... Responsibility Statement ............................................................................................................................................ Page 1 1 3 7 10 11 11 13 14 14 15 19 20 20 DEFINITIONS Acquirer ---------------------------------------------- Kennametal Inc. Amended Regulations ---------------------------- SEBI (Substantial Acquisition of Shares and Takeover Regulations, 1997 as amended on September 9, 2002. BgSE --------------------------------------------------- Bangalore Stock Exchange Birla Kennametal ----------------------------------- Birla Kennametal Limited BSE ---------------------------------------------------- The Stock Exchange, Mumbai Depository Escrow Account -------------------- Depository Account opened by the Registrar to the Offer DP ------------------------------------------------------ Depository Participant DSE ---------------------------------------------------- Delhi Stock Exchange Escrow Account ------------------------------------ Account established with Escrow Bank for up to 1% of maximum purchase consideration payable Escrow Bank ---------------------------------------- Standard Chartered Bank Ltd., 90 MG Road, Mumbai – 400 001, India FEMA -------------------------------------------------- Foreign Exchange Management Act, 1999 FII ------------------------------------------------------- Foreign Institutional Investor FIPB ---------------------------------------------------- Foreign Investment Promotion Board Form of Acceptance ------------------------------ Form of Acceptance-cum-Acknowledgement Manager/ Manager to the Offer --------------- JM Morgan Stanley Private Ltd. Million ------------------------------------------------- 10,00,000 MSE ---------------------------------------------------- Madras Stock Exchange NOC ---------------------------------------------------- No objection certificate NRI ----------------------------------------------------- Non-resident Indian NSE ---------------------------------------------------- The National Stock Exchange of India Ltd. OCB ---------------------------------------------------- Overseas corporate body Offer --------------------------------------------------- Cash offer being made by the Acquirer to shareholders of Widia (India) Limited Offer Price -------------------------------------------- Rs. 76.28 per Equity Share of Widia (India) Limited plus interest @ 10% per annum from August 31, 2002 till the date of actual payment of consideration Panel --------------------------------------------------- Takeover Panel, as provided for under Regulation 4 (1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 Public Announcement ---------------------------- Announcement of the Offer made by the Acquirer on November 15, 2002 RBI ----------------------------------------------------- Reserve Bank of India Registrar/ Registrar to the Offer --------------- Karvy Consultants Limited Regulations ------------------------------------------ SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable on May 3, 2002 SEBI ---------------------------------------------------- Securities and Exchange Board of India SEBI Order ------------------------------------------- SEBI Order No. CO/296/TO/10/2002 dated October 23, 2002 Shareholders ---------------------------------------- All owners of shares, registered or unregistered of Widia (India) Limited other than the Acquirer, who own shares at any time prior to the closure of the Offer. Shares ------------------------------------------------- 5,124,480 fully paid up Series C equity shares of the Target Company Specified Date -------------------------------------- November 15, 2002 Stock Purchase Agreement --------------------- Arrangement between the Acquirer and Milacron B.V. and Milacron Inc. for the acquisition, either directly or through affiliates, of Milacron B.V.’s European operations Target Company ----------------------------------- Widia (India) Limited US$ ---------------------------------------------------- United States Dollar 1) DISCLAIMER CLAUSE IT IS TO BE DISTINCTLY UNDERSTOOD THAT FILING OF THE LETTER OF OFFER WITH SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED, VETTED OR APPROVED BY SEBI. THE LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI FOR A LIMITED PURPOSE OF OVERSEEING WHETHER THE DISCLOSURES CONTAINED THEREIN ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH THE REGULATIONS. THIS REQUIREMENT IS IN ORDER TO FACILITATE THE SHAREHOLDERS OF THE TARGET COMPANY TO TAKE AN INFORMED DECISION WITH REGARD TO THE OFFER. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR FINANCIAL SOUNDNESS OF THE ACQUIRER, OR THE TARGET COMPANY OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ACQUIRER IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THIS LETTER OF OFFER, THE MANAGER TO THE OFFER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ACQUIRER DULY DISCHARGES HIS RESPONSIBILITY ADEQUATELY. IN THIS BEHALF, AND TOWARDS THIS PURPOSE, THE MANAGER TO THE OFFER HAS SUBMITTED A DUE DILIGENCE CERTIFICATE DATED NOVEMBER 28, 2002 TO SEBI IN ACCORDANCE WITH THE REGULATIONS. THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE ACQUIRER FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE OFFER. The Acquirer and the Manager to the Offer accept no responsibility for statements made otherwise than in the Letter of Offer or in the advertisement or any material issued by, or at the instance of the Acquirer and the Manager to the Offer, and anyone placing reliance on any other source of information would be doing so at his/her/their own risk. 2) DETAILS OF THE OFFER 2.1 Background of the Offer On May 3, 2002, the Acquirer entered into the Stock Purchase Agreement with Milacron B.V. and Milacron Inc., for the acquisition, either directly or through its affiliates, of Milacron B.V.’s European operations in Germany, Netherlands, Spain, U.K., France and Italy upon obtaining certain statutory approvals and upon certain commercial reorganisation of companies in different countries for a consideration of Euro 188,282,202. This amount is however subject to a post-closing adjustment which has not yet been finalized. However, the Acquirer and Milacron are following the procedure set forth in the Stock Purchase Agreement for effecting such a price adjustment and the purchase consideration stated in the Stock Purchase Agreement will be reduced. Pursuant to the Stock Purchase Agreement, the Acquirer was to acquire control of Milacron Metal Working Technologies Holding GmbH, a wholly owned subsidiary of Milacron B. V., which through its subsidiary companies, Widia GmbH and Meturit AG, had indirect control over the Target Company. As on May 3, 2002, Meturit AG, a wholly owned subsidiary of Widia GmbH, held 51% of the equity shares of the Target Company. Thus, the Acquirer indirectly acquired a majority of the equity shares of the Target Company from Milacron B.V. which resulted in change in control of the Target Company. As a result of the aforesaid acquisition, the Acquirer was required to make an open offer to the Shareholders of the Target Company in terms of Regulation 12 and other provisions of Chapter III of the Regulations. The Acquirer made an application dated July 12, 2002 under sub-regulation (2) of Regulation 4 of Regulations to SEBI seeking exemption from making a public announcement and other formalities in terms of Regulations 10 and 12 and other provisions of Chapter III of the Regulations. In the aforesaid application Acquirer inter-alia requested an exemption from making an Offer to the Shareholders of the Target Company on the following grounds : The Acquirer was unable to obtain the requisite approval from FIPB. Under current regulations in India, a foreign investor with a previous joint venture in the same or allied field in India, is required to obtain a NOC from its existing joint venture partner. The Acquirer has a joint venture in India with the Yash Birla group in Birla Kennametal and is required to obtain a NOC from the Yash Birla group. The Acquirer wrote to Mr. Yash Birla twice (on July 5, 2002 and again on July 9, 2002) requesting Mr. Yash Birla to give a NOC, stating in the letters that the NOC was required in order to obtain the FIPB approval to acquire the Shares of the Shareholders of the Target Company. In both instances, Mr. Yash Birla stated that the Yash Birla group objected to the Acquirer’s proposal to acquire the Shares (vide his letters dated July 8, 2002 and July 11, 2002). As such, the Acquirer stated to SEBI that it would be futile for it to make a public offer for the Shares of the Target Company because it would eventually be forced to withdraw the public offer since the requisite FIPB approval would not be granted. The Acquirer also stated that making such a public offer would create artificial expectations in the market, and could result in manipulation of the market. Thus, to avoid the creation of artificial expectations and any such market manipulation and to save the resources of both the Acquirer and SEBI, the Acquirer sought an exemption from making a public offer under the Regulations. 1 2.2 Hearing The matter was referred to the Panel by SEBI. The Panel did not recommend granting the exemption sought by the Acquirer. However, the Acquirer was granted a hearing before the SEBI Chairman. The Acquirer made further submissions at the hearing, and vide letter dated September 24, 2002 to SEBI, reiterated the submissions made earlier and also addressed the following additional issues: The Stock Purchase Agreement contained a number of conditions precedent to closing of the transaction, including governmental approvals in various countries, numerous corporate and holding company re-organizations in several countries, the transfer of the Target Company shares from SAK Industries Limited to Meturit AG and the termination of all agreements, arrangements and disputes between the two promoters of the Target Company. On December 20, 1994, SAK Industries Limited and Meturit AG entered into a Shareholders Agreement to record the rights and obligations of the parties with respect to the management and affairs of the Target Company. Under clause 8.1 of the Shareholders Agreement, SAK Industries Limited had the preemption right to acquire the shares held by Meturit AG if Meturit AG was desirous of disposing off the said shares. In 2002 Milacron Inc. and Milacron BV started to search for another global entrepreneur to acquire the European business of Milacron B.V. Upon learning about this search, SAK Industries Limited alleged that Milacron Inc. was in breach of the Shareholders Agreement dated December 20, 1994, since it intended to transfer the control of 51% shares indirectly held by it in the Target Company to a third party without enabling SAK Industries Limited to exercise its preemption right. Thus, SAK Industries Limited, in February 2002, initiated legal proceedings against, inter alia, Milacron and Meturit AG for an order from the Court to enable SAK Industries Limited to exercise its preemption right. On May 3, 2002, Milacron Inc. and Milacron B.V. entered into a Stock Purchase Agreement with the Acquirer to sell all the European business of Milacron B.V. As a consequence of this agreement, the Acquirer indirectly acquired Meturit AG. There were a large number of preconditions to the consummation of this transaction. One of these preconditions was that Meturit AG was required to purchase the shares held by SAK Industries Limited in the Target Company and to settle the dispute which was the subject matter of the aforesaid court case. The settlement arrived at by Milacron Inc. with SAK Industries Limited and recorded under an agreement, dated May 3, 2002, in relation to these legal proceedings filed in the Bangalore Court, resulted in, among other things, the termination of the Shareholders Agreement dated December 20, 1994, waiver of all rights of SAK Industries Limited under the said agreement, enabling the transfer of 51% shares in the Target Company to the Acquirer and the execution of a non-compete agreement between Meturit AG and SAK Industries Limited. It should be noted that this is not the first time that SAK Industries Limited has intervened in this manner. A similar situation arose in 1994 when Fried Krupp (then the parent company of Meturit AG, which owned 51% of the Target Company) intended to sell all of the capital stock of Meturit AG to Milacron. Disputes arose between SAK Industries Limited and Fried Krupp because SAK Industries Limited, under a Promotion Agreement, dated 30th September, 1963, with Meturit AG, allegedly had a preemption right to acquire the shares of the Target Company in case of sale of shares of the Target Company held by Meturit AG to any third party. The intended sale of shares by Fried Krupp to Milacron would have resulted in Milacron controlling 51% of the shareholding of the Target Company, in place of Fried Krupp as envisaged in the Promotion Agreement. A settlement was reached between SAK Industries Limited and Fried Krupp and was recorded in an agreement dated December 20, 1994, whereunder SAK Industries Limited relinquished its right to acquire the shares of the Target Company from Meturit AG and /or its parent or affiliated company and gave its consent to the sale by Fried Krupp of the shares to Milacron for a consideration of DM 10,500,000. In fulfilment of the condition relating to the Target Company, Meturit AG acquired 25.68% of the equity share capital of the Target Company held by SAK Industries Limited, New Delhi, the Indian Promoter, at a RBI determined price of Rs. 76.28 per share. All other conditions to closing were satisfied on or about August 30, 2002. As such, the actual change of control of the Target Company took place on August 30, 2002 prior to the notification and enforcement of the Amended Regulations. The Acquirer had, prior to the notification of the Amended Regulations and in reliance upon the provisions of the Regulations: (a) applied to SEBI on July 12, 2002, seeking an exemption from making a public announcement and an open offer; and (b) applied to the FIPB vide its letter dated September 6, 2002 seeking approval to purchase additional shares of the Target Company. Given all of the above, the Acquirer relied upon the provisions of Regulation 20 of the Regulations to calculate the minimum offer price at which an open offer had to be made. On these facts, the Acquirer asserted that the open offer should be governed by the provisions of the Regulations and not the Amended Regulations. 2 2.3 Order The SEBI Order directed the following: (i) The Acquirer make a public announcement as required under Regulation 12 and other provisions of Chapter III of the Regulations, using May 3, 2002 as the reference date for calculation of the offer price. The public announcement was required to be made within 45 days of issuance of the SEBI Order; In terms of sub-regulation (12) of Regulation 22 of the Regulations, the payment of consideration to the shareholders of the Target Company was to be made within 30 days of the closure of the offer. The maximum time period provided in the Regulations for completing the formalities of an open offer was 120 days from the date of public announcement. If the public announcement had been made using May 3, 2002 as the reference date, the entire offer process would have been completed by August 31, 2002. Since no public announcement was made on May 3, 2002, and the shareholders of Target Company may have been adversely affected, the Acquirer was to pay interest at the rate of 10% per annum on the offer price from August 31, 2002 until the date of actual payment of the consideration for the shares to be tendered and accepted, in the offer to be made by the Acquirer; and (ii) (iii) The provisions of the Regulations (and not the Amended Regulations) were applicable and in calculating the offer price to be paid to the shareholders of the Target Company, the Acquirer was to take into account the price of Rs. 76.28 per share paid by Meturit AG to SAK Industries Limited together with the other parameters set forth in the relevant provisions of Regulation 20 of the Regulations. Pursuant to the SEBI Order, the Acquirer is making the Offer to the Shareholders of the Target Company under Regulation 12 and Chapter III of the Regulations to acquire the remaining Shares of the Target Company, at the Offer Price payable in cash. Further, the Acquirer will pay interest @10% per annum from August 31, 2002 till the actual date of payment of consideration for the Shares that are tendered and accepted in the Offer as directed by the SEBI Order. The Offer is subject to the Acquirer obtaining the approval of FIPB to acquire the Shares from the Shareholders. The Acquirer indirectly holds 16,853,760 equity shares representing 76.68% of the issued equity share capital of the Target Company as on the date of the Public Announcement. The Shares of the Target Company are listed on the BSE, the DSE, the BgSE and the MSE. The Shares were permitted to trade on the NSE till September 30, 2002. The Shares are frequently traded on the BSE and on NSE but infrequently traded on the DSE, BgSE and MSE within the meaning of Regulation 20 of the Regulations (Source: respective stock exchanges). The Offer is not subject to any minimum level of acceptance by the Shareholders. The Public Announcement, as per Regulation 15(1) of the Regulations, was made in the following newspapers on November 15, 2002: Newspaper Business Standard Nava Bharat Vijay Karnataka Sakal Language English Hindi Kannada Marathi Editions Mumbai, New Delhi, Ahmedabad, Bangalore, Hyderabad, Chennai, Kolkatta Mumbai, Nagpur, Bilaspur, Raipur Bangalore Mumbai A copy of the Public Announcement is also available on the SEBI website at “www.sebi.gov.in” Any upward revision in the Offer Price will be announced in the above-mentioned newspapers and the same price would be payable by the Acquirer for all the valid shares tendered at any time during the Offer. Neither the Acquirer nor the directors of the Acquirer have acquired any equity shares of Target Company from the date of the Public Announcement till the date of this Letter of Offer. Based on the information available from the Acquirer, Target Company and the SEBI website, the Acquirer and Target Company have not been prohibited by SEBI from dealing in securities, in terms of directions under Section 11B of the SEBI Act, 1992. 3. BACKGROUND OF THE ACQUIRER The Acquirer is a publicly held company with its registered office at 1600 Technology Way, P Box 231, Latrobe, Pennsylvania .O. 15650-0231 USA. The Acquirer was incorporated in Pennsylvania on June 25, 1943. The Acquirer is a global leader engaged 3 in the manufacture, purchase and distribution of a broad range of tools, tooling systems, and solutions to the metalworking, mining, oil and energy industries, and wear-resistant parts for a wide range of industries. The Acquirer is strategically organized along four global business units: Metalworking Solutions and Services Group, Advanced Materials Solutions Group, J&L Industrial Supply and Full Service Supply. The Acquirer provides customers a broad range of technologically advanced tools, tooling systems and engineering services aimed at improving customers’ manufacturing competitiveness. The Acquirer’s products utilize highly complex metallurgy and materials science in tungsten carbide powders, high-speed steels, ceramics, industrial diamond and other materials that are particularly resistant to heat, abrasion, pressure and wear. The Acquirer is the market leader in North America in metal-cutting tools and is second in Europe and worldwide. It is amongst the global market leaders in tools for the mining and highway construction industries. The Acquirer markets its products under several respected and widely recognized brand names, including Kennametal, Kennametal Hertel, Hertel, Rübig, Cleveland Twist Drill, Greenfield, Hanita, Circle Machine, Vermont Tap & Die, Disston, Blu-Mol, RTW, Carbidie and Adaptive Technologies. With 11,600 employees worldwide, the Acquirer is represented in more than 60 countries and serves a vast array of end markets, including industries such as aerospace, automotive, construction and farm machinery, power generation and transmission equipment, home appliances and oil and gas exploration. The Acquirer markets its products and services through a multi-channel network that includes a highly trained and skilled direct sales force, mail order and direct marketing, Internet, integrated supply programs and a network of independent industrial distributors. The shares of the Acquirer are listed on the New York Stock Exchange and approximately 87% of its shares are held by institutions. Adjudication - In terms of Section 15-I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the “Act”), Shri S V Krishna Mohan has been appointed as the Adjudicating Officer to inquire and adjudge under Sub-section (ii) of Section 15H of the Act, the alleged contravention of Regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Regulations”) by the Acquirer for the failure to make the public announcement pursuant to the acquisition of control of the Target Company on May 3, 2002. The Adjudicating Officer shall hold the inquiry in the manner specified under Rule 4 of the SEBI (Procedure for holding inquiry and imposing penalties by adjudicating officer) Rules, 1995 (hereinafter referred to as the “Rules”) read with sub-section (2) of Section 15-I of the Act and may impose such penalty, as he thinks fit, in accordance with the provisions of the relevant section specified in Section 15-I of the Act read with Rule 5 of the Rules. The Acquirer will be vigorously contesting the adjudication proceedings. The market price of the Acquirer on the New York Stock Exchange as on November 15, 2002, the date of Public Announcement, was US$ 32.95 (Source: Bloomberg). The members of the Board of Directors of Kennametal Inc. are as listed below: Name Markos I. Tambakeras, Chairman of the Board ................ William R. Newlin, Lead Director ...................................... Richard C. Alberding ......................................................... Peter B. Bartlet ................................................................... Ronald M. DeFeo ............................................................... A. Peter Held ...................................................................... Kathleen J. Hempel ............................................................ Aloysius T. McLaughlin ...................................................... Larry D. Yost ....................................................................... Address 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 1600 Technology Way, P Box 231, Latrobe, .O. Pennsylvania 15650-0231 None of the Directors of the Acquirer is a member of the Board of Directors of Target Company 4 Summary of the financial information of the Acquirer derived from audited financial statements after taking into consideration exchange rates for the years ending June 30, 2000, June 30, 2001, and June 30, 2002 is as follows : (Figures in million) Profit and Loss Statement 2000 US$ Average Exchange Rates1 ................................... Net sales .............................................................. Other income (expense) ..................................... Total income ........................................................ Total expenditure excluding interest and depreciation .................................... Income before depreciation, interest and provision for income taxes ....................................................... Depreciation ........................................................ Interest ................................................................. Income before provision for income taxes and minority interest .................................................. Provision for income taxes ................................. Minority interest .................................................. Income before extraordinary loss and cumulative effect of change in accounting principles ........................ Cumulative effect of change in accounting principles, net of tax ........................ Extraordinary loss on early extinguishment of debt, net of tax ..................... Net income (loss) ................................................ Special charges, including goodwill amortization, extraordinary loss on early extinguishment of debt, net of tax and cumulative effect of change in accounting principles, net of tax .............................................................. Net income excluding special charges ................................................... Note: 1 Fiscal Year ended June 30, 2001 US$ Rs. 46.25 1,808 (12) 1,796 1,579 83,620 (555) 83,065 73,029 1,584 — 1,584 1,421 US$ 2002 Rs. 48.10 76,190 — 76,190 68,350 Rs. 43.58 1,867 (3) 1,864 1,633 81,364 (131) 81,233 71,166 231 75 55 10,067 3,269 2,397 217 73 50 10,036 3,376 2,313 163 71 33 7,840 3,415 1,587 101 44 5 4,401 1,918 218 94 37 3 4,347 1,711 139 59 19 2 2,838 914 96 52 — — 52 2,265 — — 2,265 54 (1) — 53 2,497 (46) — 2,451 38 (250) — (212) 1,828 (12,025) — (10,197) 32 84 1,395 3,660 33 86 1,526 3,977 274 62 13,179 2,982 Some of the amounts have been adjusted for rounding so that sub-totals within the statements are mathematically correct. Average based on exchange rates for twelve months of the year 5 (Figures in million) Balance Sheet 2000 US$ End of period exchange rate .............................. Sources of Funds Common stock and additional paid in capital (net of treasury stock) ................................................................... Reserves & surplus .............................................. Net worth ............................................................ Long-term liabilities ............................................ Minority interest in consolidated subsidiaries ......................................................... Total ..................................................................... Uses of Funds Net fixed assets ................................................... Investments in affiliated companies ........................................................... Intangible assets less accumulated amortization .................................. Net current assets ............................................... Other assets ........................................................ Total ..................................................................... Note: 499 3 661 397 30 1,590 22,285 134 29,520 17,730 1,340 71,009 473 4 625 386 43 1,531 22,236 188 29,381 18,146 2,021 71,972 435 12 368 376 71 1,262 21,228 586 17,958 18,349 3,465 61,586 Rs. 44.66 US$ Fiscal Year ended June 30, 2001 Rs. 47.01 US$ 2002 Rs. 48.80 321 459 780 755 55 1,590 14,336 20,499 34,835 33,718 2,456 71,009 330 467 797 724 10 1,531 15,513 21,954 37,467 34,035 470 71,972 466 248 714 537 11 1,262 22,741 12,102 34,843 26,206 537 61,586 Some of the amounts have been adjusted for rounding so that sub-totals within the statements are mathematically correct. Fiscal Year ended June 30, 2000 US$ Rs. 30.00 74 120 US$ 0.68 1.73 2.79 6.8% 10.9% 1,142 25.84 31 1,215 2001 Rs. 31 80 129 US$ 0.68 (6.70) 1.95 -38.3% 10.5% 20.51 35 1,001 2002 Rs. 33 (322) 94 Other Financial Data Dividends per share ............................................ Diluted earnings (loss) per share ....................... Diluted earnings per share before extraordinary and special items ......................... Return on net worth ............................................ Return on net worth excluding special charges ................................................... Book value per share .......................................... Total number of shares outstanding (in millions) .................................... 0.68 1.70 2.76 6.9% 11.1% 25.56 31 6 3.1 Other Company Promoted by the Acquirer in India The Acquirer has a joint venture in India with the Yash Birla Group in Birla Kennametal. Birla Kennametal was incorporated on October 13, 1986. The nature of business of Birla Kennametal is to carry on in India or elsewhere the business of assembling, fabrication, manufacture, production, buying, selling, importing, exporting, repairing, servicing, or otherwise dealing in all machine tools, types of tool and work holders, rotary positioning, small and cutting tools, miniature tools, parts of machine tools and machine tool accessories. The Registered Office of the company is at B – 15/4, M.I.D.C. Industrial Area, Waluj, Aurangabad, (Maharashtra), Pin code - 431 133, India. Birla Kennametal is not a sick industrial company within the meaning of Section 3(1)(o) of the Indian Sick Industrial Companies (Special Provisions) Act, 1985. A brief summary of the financial details of Birla Kennametal derived from the audited financial statements for the financial years ending March 31, 2000, 2001 and 2002 are as follows: (All figures in Rs. Million) Particulars 2000 Total Income ...................................................................................... Profit After Tax ................................................................................... Equity Capital .................................................................................... Reserves1 ........................................................................................... Earnings Per Share ............................................................................ Book Value Per Share ........................................................................ 1 Financial Year ending March 31, 2001 84.88 6.80 32.00 4.55 2.13 11.42 2002 85.94 8.92 32.00 13.49 2.79 14.22 52.08 0.70 32.00 (2.26) 0.22 9.29 Reserves net of miscellaneous expenses not written off and Accumulated losses 4. BACKGROUND OF THE TARGET COMPANY The Target Company was incorporated under the Companies Act, 1956 on September 21, 1964, as a public limited company. The Target Company has its Registered Office at 8/9th Mile, Tumkur Road, Bangalore – 560 073. There has been no change in the name of the Target Company since inception. The issued equity share capital of the Target Company as on the date of the Public Announcement was Rs.219,782,400 comprising 21,978,240 equity shares of Rs.10 each. Of the above, 11,208,840 shares were Series A shares, 5,644,920 were Series B shares and 5,124,480 were Series C shares. There are no partly paid up shares carrying voting rights or any outstanding convertible instruments. The shares of the Target Company are listed on the BSE, the DSE, the BgSE and the MSE. The shares were permitted to be traded on the NSE until September 30, 2002. Share capital structure of the Target Company Paid up Equity Shares of Target Company Fully paid up equity shares: Series A shares ...................................................... Series B shares ....................................................... Series C shares ...................................................... Partly paid up equity shares .................................. Total paid up equity shares .................................... Total voting rights in Target Company ................ Note : 11,208,840 5,644,920 5,124,480 Nil 21,978,240 21,978,240 100% 100% 51.0% 25.7% 23.3% No. of Shares / voting rights % of shares/voting rights As per the Articles of Association of the Target Company, ‘A’ Series equity shares shall always be offered and allotted to Meturit AG, the ‘B’ Series equity shares shall always be offered and allotted to SAK Industries Limited and, the ‘C’ Series equity shares shall always be offered and allotted to members of the public. The classification of 7 the shares of the Company into A, B and C Series equity shares has been made with a view to identify the respective holdings of Meturit and its nominees, SAK Industries Limited and its nominees and the members of the public in the share capital of the Target Company. All the said shares form one class of shares and rank pari-passu with one another in all respects except with regard to transfer, the provision for which have been outlined in the Articles of Association. Currently all the ‘B’ Series equity shares are also held by Meturit AG. The Target Company manufactures a wide range of cutting tools, forming tools, mining tools and special purpose machines. Its products include hard metal products, mining tools, special-purpose machines, metal castings, formings, jigs and fixtures. The Target Company has also introduced several new state of the art products including new generation milling cutters, special solid carbide tools, new generation coated inserts, warm forging tools for the bearing industry and cold forgings dies for big auto components. It exports its products to Japan, Germany and the South-East Asian countries. It has two manufacturing facilities at Bangalore in Karnataka and at Patancheru in the Medak District in Andhra Pradesh and eleven branch offices in Bangalore, Bhopal, Chandigarh, Chennai, Hyderabad, Jamshedpur, Kolkata, Mumbai, New Delhi, Pune and Ranchi. There have been no mergers or demergers or spin off involving the Target Company during the last three years. The Target Company had not complied with the reporting requirements under Regulations 6 and 8 of Chapter II of the Regulations. The Target Company has received the necessary declarations from Meturit A.G, required under Regulations 6 and 8 of the Regulations and has filed the same with the Bangalore Stock Exchange along with a demand draft in favour of SEBI in accordance with the SEBI Regularisation Scheme, 2002. Target Company has complied with all the provisions of the listing agreement entered into with the stock exchanges and no punitive action has been initiated by any of the stock exchanges against it. The members of the Board of Directors of the Target Company are as follows: Name Madhukar Narayan Bhagwat ........................................ Residence Address No.62, Blue Haven Mount Pleasant Road Mumbai – 400 006 33-A “Sonarica” Sterling Apartments Peddar Road, Mumbai – 400 026 P Box 758, James Town .O. Kentucky – 42629 Rankenweg – 5, D-44265 Dortmund, Germany T1, Cavalade Apartments No.5, Benson Road Benson Town, Bangalore – 560 046 Eruch Byramsha Desai .................................................. Jeffrey Barrett ................................................................ Lothar Paasch ................................................................ Kumar Kanetkar ............................................................. Please note that any correspondence to the members of the Board of Directors must be addressed to the Registered Office of the Target Company. None of the Directors of the Target Company are representatives of the Acquirer. 8 The audited financial details of Target Company for the financial years ended December 31, 1999, 2000 and 2001 and, the unaudited financial details for the six months from January 1, 2002 to June 30, 2002 are as follows: (Figures in million) Profit and Loss Statement Financial Year ended December 31, 1999 Rs. Income from Operations ........................................ Other income ......................................................... Total Income ........................................................... Total Expenditure ................................................... Profit before Interest, Depreciation & Tax ................................................. Depreciation ........................................................... Interest .................................................................... Profit before tax ...................................................... Provision for tax ..................................................... Deferred Tax Credit ................................................ Profit after tax ........................................................ 2,147.76 96.42 2,244.17 1,706.21 537.96 90.95 71.28 375.73 96.92 0.00 278.81 2000 Rs. 2,344.77 60.52 2,405.29 1,902.07 503.22 98.78 59.52 344.91 101.31 0.00 243.60 2001 Rs. 2,109.78 47.76 2,157.54 1,935.97 221.57 102.39 67.65 51.52 20.77 (21.56) 52.32 January 1, 2002 to June 30, 2002 Rs. 835.02 13.82 848.84 1,062.17 (213.34) 53.04 28.65 (295.03) 0.00 (42.04) (252.99) (Figures in million) Balance Sheet 1999 Rs. Sources of funds Paid-up equity share capital --------------------------Reserves and surplus (excl. Revaluation Reserves) .................................. Net Worth ............................................................... Secured Loans ........................................................ Unsecured Loans .................................................... Total ......................................................................... Uses of funds Net Fixed Assets ..................................................... Investments ............................................................. Net Current Assets .................................................. Total Miscellaneous Expenditure not written off .......................................................... Deferred Tax Liability .............................................. Total ......................................................................... 535.08 0.04 1,227.76 7.31 0.00 1,770.19 552.05 0.03 1,236.69 8.88 0.00 1,797.65 632.37 0.03 1,525.78 13.02 (46.58) 2,124.62 608.48 0.03 1,263.03 11.37 (4.55) 1,878.35 109.89 1,392.99 1,502.88 114.28 153.03 1,770.19 219.78 1,487.59 1,707.37 32.94 57.33 1,797.65 219.78 1,435.43 1,655.21 60.57 408.83 2,124.62 219.78 1,182.44 1,402.22 67.82 408.30 1,878.35 As on December 31, 2000 Rs. 2001 Rs. As on June 30, 2002 Rs. 9 Other Financial Data Financial Year ended December 31, 1999 2000 15.00% 11.08 14.27% 77.68 2001 15.00% 2.38 3.16% 75.31 Period June 30, 2002 0.00% (11.51) (18.04)% 63.80 Dividend (%) ---------------------------------------------------------Earning per share (Rs.) ---------------------------------------------Return on net worth ------------------------------------------------Book value per share (Rs.) ----------------------------------------Shareholding Pattern 30.00% 253.72 18.55% 1,367.60 The equity shareholding in Target Company before the Offer (as on November 16, 2002) and after the Offer (assuming full acceptance of the Offer) is given in the table below: Shareholding/voting rights prior to the Offer (on specified date, except Promoter Group) Shareholders’ Category 1. 2. 3. Promoter Group Acquirer Institutional Investors a. b. c. d. e. f. Financial Institutions ----------------Banks ------------------------------------Mutual Funds -------------------------NRI individuals/OCBs ---------------Foreign Institutional Investors ---Non- Domestic Companies -------— 505,320 4,619,160 21,978,240 — 2.30 % 21.02 % 100.00 21,978,240 100.00 — — — — 502,960 2,160 200 — 2.29 0.01 0.00 — No. of Shares — 16,853,760 1 Shareholding/voting rights to be acquired in the Offer (assuming full acceptance) No. of Shares % — 23.32 Shareholding/ voting rights after the Offer No. of Shares — 21,978,240 % — 100 % — 76.68 — 5,124,480 Total -----------------------------------------4. Public ---------------------------------------------------------------------------------1 Total Data provided by Target Company. Shares held indirectly by the Acquirer pursuant to Stock Purchase Agreement 5. REASONS FOR THE OFFER AND FUTURE PLANS The Offer to the Shareholders of the Target Company is made as directed by the SEBI Order and in compliance with Regulation 12 and the other relevant regulations of Chapter III of the Regulations pursuant to change in control or management without any substantial acquisition of shares or voting rights. The Acquirer does not have any plans at present to make any major change to the existing lines of business of the Target Company or to dispose off or otherwise encumber any assets of the Target Company in the next two years, except in the ordinary course of business of the Target Company and except to the extent required for the purpose of restructuring or rationalizing the existing lines of business, assets, investments, liabilities or otherwise of the Target Company. It will be for the Board of Directors of the Target Company to take any appropriate decisions in these matters in accordance with the requirements of the business. Such decisions will be governed by the provisions of the Regulations or any other applicable Act or legislation that may be applicable to such decision at the relevant time. The Acquirer shall not, in the two years from the date of the closure of the Offer, dispose off or otherwise encumber any substantial asset of the Target Company except with prior approval of the shareholders of the Target Company. The Acquirer may make changes in the management and the Board of Directors of the Target Company. The Acquirer also may change the name of the Target Company after completion of the Offer. 10 6. ACQUIRER’S CURRENT SHAREHOLDING The Acquirer indirectly holds 16,853,760 equity shares representing 76.68% of the issued fully paid up equity share capital of the Target Company. All Shares tendered and accepted under the Offer will be acquired through the Acquirer, subject to terms and conditions set out herein. The Acquirer has not acquired any shares of the Target Company during the 26 week period prior to May 3, 2002 and subsequently up to the date of the Public Announcement, including by way of allotment in a public or rights issue. None of the Directors of the Acquirer have acquired any shares of the Target Company during the last twelve months prior to May 3, 2002 nor subsequently up to the date of the Public Announcement. No preferential allotment of shares has been made by the Target Company to the Acquirer at any time during the twelve month period up to May 3, 2002 nor subsequently up to the date of the Public Announcement. 7. OFFER PRICE The Shares of Target Company are listed on the BSE, the DSE, the BgSE and the MSE. The Shares were permitted to trade on the NSE till September 30, 2002. The Shares are frequently traded on the BSE and the NSE but infrequently traded on the DSE, BgSE and MSE within the meaning of Regulation 20 of the Regulations. The details of trading volumes on stock exchanges are provided below: Total shares traded during the six calendar months ended April 30, 2002 NSE BSE DSE BgSE MSE 560,345 325,083 NIL NIL NIL Total No. of listed shares 21,978,240 21,978,240 21,978,240 21,978,240 21,978,240 Annualised trading turnover as a % of total number of listed shares 5.1% 3.0% NIL NIL NIL Source: Official data obtained from the stock exchanges. As the annualised trading turnover on NSE and BSE is more than 2% of the total number of listed Shares, the Shares of Target Company are deemed to be frequently traded on both the NSE and BSE as per the explanation to Regulation 20(3) of the Regulations, with maximum trading volumes on NSE. The weekly high and low of the closing prices of the Shares, during the 26-week period ending May 3, 2002 (being the reference date for the Offer Price calculation as per the SEBI Order), are given below: National Stock Exchange (NSE) Week Ending High 1 2 3 4 5 6 7 09-Nov-01 15-Nov-01 23-Nov-01 29-Nov-01 07-Dec-01 14-Dec-01 21-Dec-01 47.15 51.10 55.10 54.00 54.90 52.50 49.50 Closing Price (Rs.) Low 45.00 49.30 50.00 50.55 52.10 50.90 47.00 Average 46.08 50.20 52.55 52.28 53.50 51.70 48.25 Volume (shares) 3,511 2,532 1,981 516 2,750 2,208 890 11 National Stock Exchange (NSE) Week Ending High 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28-Dec-01 04-Jan-02 11-Jan-02 18-Jan-02 25-Jan-02 01-Feb-02 08-Feb-02 15-Feb-02 22-Feb-02 01-Mar-02 08-Mar-02 15-Mar-02 22-Mar-02 28-Mar-02 05-Apr-02 12-Apr-02 19-Apr-02 26-Apr-02 03-May-02 44.50 49.30 49.10 48.25 48.40 48.85 49.00 57.90 60.25 53.5 51.05 53.85 56.10 54.65 66.75 85.15 87.15 74.40 84.25 Closing Price (Rs.) Low 44.50 47.95 46.30 46.10 46.60 47.10 47.35 47.75 52.30 50.00 49.05 50.00 53.90 53.10 52.95 69.45 74.20 71.85 76.55 Average 44.50 48.63 47.70 47.18 47.50 47.98 48.18 52.83 56.28 51.75 50.05 51.93 55.00 53.88 59.85 77.30 80.68 73.13 80.40 54.97 Volume (shares) 100 6,964 3,670 4,255 3,687 2,843 7,846 36,406 27,707 8,180 5,719 6,936 19,467 7,541 15,842 136,372 151,439 40,164 111,110 Average of 26 weeks (Rs.) In accordance with Regulation 20 of the Regulations, the Offer Price of Rs. 76.28 represents a 38.7% premium to the 26 week average (May 3, 2002 as the reference date) of the weekly high and low of closing prices for the Shares of Target Company on NSE, the exchange where the Shares are most frequently traded, as tabulated above. Further : q The Acquirer has not acquired any Shares of Target Company under any agreement referred to in Regulation 14(1). The Acquirer has not acquired any Shares of the Target Company during the 26 week period prior to May 3, 2002 and subsequently up to the date of the Public Announcement, including by way of allotment in a public or rights issue. No preferential allotment of Shares has been made by the Target Company to the Acquirer at any time during the twelve month period up to May 3, 2002 nor subsequently up to the date of the Public Announcement. q q No financial diligence has been carried out by the Acquirer in respect of the Target Company. Only limited due diligence was carried out regarding the Target Company based on the Annual reports, etc. made available by Milacron Inc.and Milacron B.V. No specific value was ascribed to the Target Company in the global transaction. The revenues, assets and net profit of the Target Company was Euro 49,899,000, Euro 70,596,000 and Euro 3,894,000 respectively for 12 months ending December 31, 2001 and Euro 52,120,000, Euro 48,976,000 and Euro 9,579,000 respectively for 12 months ending December 31, 2000. The revenues, assets and net profit of all the businesses purchased by the 12 Acquirer from Milacron Inc. and Milacron B.V. was Euro 266,132,000, Euro 246,982,000 and Euro 9,255,000 respectively for 12 months ending December 31, 2001 and Euro 235,672,000, Euro 210,559,000 and Euro 20,027,000 respectively for 12 months ending December 31, 2000. The proportion of the revenues, assets and net profit of the Target Company in the businesses purchased by the Acquirer from Milacron Inc. and Milacron B.V. was 19%, 29% and 42% for 12 months ending December 31, 2001 and 22%, 23% and 48% for 12 months ending December 31, 2000, respectively. This information has not been audited since the companies purchased by the Acquirer from Milacron Inc. and Milacron B.V. are not public companies. This information was prepared and provided to the Acquirer by Milacron during the due diligence process. The Shares are infrequently traded on the DSE, BgSE and MSE. Hence, in terms of clause 20(3) of the Regulation, the Offer Price is justified as follows: q The Acquirer has not acquired any Shares of Target Company under any agreement referred to in Regulation 14(1). The Acquirer has not acquired any Shares of the Target Company during the 26 week period prior to May 3, 2002 and subsequently up to the date of the Public Announcement, including by way of allotment in a public or rights issue. No preferential allotment of Shares has been made by the Target Company to the Acquirer at any time during the twelve-month period up to May 3, 2002 nor subsequently up to the date of the Public Announcement. Other parameters with reference to Target Company for the year ending 31 December 2001 are as follows: Book Value per Share ........................................................................................................ Return on Net Worth .......................................................................................................... Earnings per Share ............................................................................................................ Price Earnings Multiple based on the Offer Price ............................................................. Industry Average for [Engineering – Machine Tools] * .................................................... *Source: Capital Market, Vol. XVII/17 q q q Rs. 75.3 3.1% Rs. 2.4 32.1x 11.0x The Acquirer shall not acquire during the Offer Period any Shares except in compliance with the Regulations and the details of such acquisitions shall be disclosed to the stock exchanges and to the Manager within 24 hours thereof in terms of the Regulation 22(17). If the Acquirer acquires Shares in the open market or through negotiation or otherwise, after the date of Public Announcement at a price higher than the Offer Price, then the highest price paid by the Acquirer for such acquisition shall be payable for all acceptances received under the Offer. No acquisition of any Shares will be made by the Acquirer in the open market in the seven working days prior to the date of the closure of the Offer (i.e. Tuesday, February 4, 2003). 8. FINANCIAL ARRANGEMENT The maximum purchase consideration payable by the Acquirer in the case of full acceptance of the Offer including interest @10% per annum from August 31, 2002 till March 6, 2002 i.e. the scheduled date of payment of consideration, is Rs 411.03 million, for shares to be tendered and accepted in the Offer. This will be funded from the available credit lines of the Acquirer. In accordance with the provisions of Regulation 28 of the Regulations, the Acquirer has established a bank guarantee in favour of the Manager to the Offer for Rs. 102.94 million which is more than 25% of the maximum consideration payable under the Offer, through the Standard Chartered Bank Ltd. having its office at 90 MG Road, Mumbai – 400 001, India. This bank guarantee is valid until April 7, 2003. The Acquirer has also made a cash deposit of US$ 86,000 (being not less than 1% of the maximum purchase consideration payable under this Offer) in a depository account with J. P Morgan Trust Company, National Association, having its office at . One Oxford Centre, Suite 1100, 301 Grant Street, Pittsburgh, PA 15219. The Manager to the Offer is authorised to realise the value of the aforesaid depository account. Up to 1% of the maximum purchase consideration payable under this Offer would be transferred from the aforesaid depository account to the Escrow Account with the Escrow Bank, after the requisite approval has been obtained from RBI for opening the Escrow Account in India. Application to RBI for opening of Escrow Account would be made after receipt of FIPB approval for the Offer. The Acquirer has empowered the Manager to the Offer to realise the value of the Escrow Account under the Regulations. 13 The Acquirer’s banker, JP Morgan Chase Bank, has confirmed that sufficient resources are available for the Acquirer to fulfill its obligations in full under the Offer. On basis of the above, the Manager to the Offer has satisfied itself that the Acquirer has the financial resources to implement the Offer in accordance with the Regulations. 9. DELISTING OPTION TO THE ACQUIRER If pursuant to this Offer, the public shareholding of the Target Company falls to 10% or below of its outstanding equity share capital, then in accordance with Regulation 21(3) of the Regulations, the Acquirer will seek to delist the Target Company and make an offer to buy the remaining Shares from the Shareholders within three months from the closure of the Offer, at the Offer Price. On completion of the second offer, the Acquirer will request the Target Company to approach the stock exchanges where the Shares of the Target Company are listed for delisting the Shares. 10. TERMS AND CONDITIONS OF THE OFFER (a) (b) The Offer is being made in accordance with the provisions of Regulation 12 of the Regulations. The Acquirer made the Public Announcement on Friday, November 15, 2002 for the Offer. This Offer is made to the Shareholders of Target Company. However, the Letter of Offer is being mailed to the Shareholders whose names appear on the Register of Members of Target Company at the close of business on the Specified Date i.e. Friday, November 15, 2002. The Offer is subject to the Acquirer obtaining the approval of FIPB and RBI under FEMA, for acquiring and transferring the Shares tendered in this Offer. The Acquirer has made an application to the FIPB seeking approval to acquire the entire outstanding Shares of Target Company. FIPB has acknowledged the same and the application is under review. The Acquirer expects difficulty in getting the FIPB approval because its existing joint venture partner Mr. Yash Birla has twice refused to give the NOC, which is required to be submitted along with FIPB application. The Acquirer will not proceed with the Offer if FIPB approval is not received/denied.(Also refer to disclosure on the cover page) As of the date of this Letter of Offer, to the best of knowledge of the Acquirer, there are no other statutory approvals required to implement the Offer other than those indicated above. If any other statutory approvals become applicable, the Offer would be subject to such statutory approvals. The Acquirer will not proceed with the Offer in the event that such statutory approvals are not obtained/denied. In case of delay in receipt of any statutory approval, SEBI has the power to grant an extension of the time required for payment under the Offer provided that the Acquirer agrees to pay interest in accordance with Regulation 22(12) of the Regulations. If the delay occurs due to the willful default of the Acquirer in obtaining the requisite approvals, Regulation 22(13) of the Regulations will become applicable. The Acquirer will not proceed with the Offer in the event the statutory approvals indicated above are refused in terms of Regulation 27 of the Regulations. Each Shareholder of Target Company, to whom this Offer is being made, is free to offer his shareholding in Target Company, in whole or in part while accepting the Offer. The Offer will open on Monday, January 6, 2003 and close on Tuesday, February 4, 2003. Accidental omission to dispatch this Letter of Offer or any further communication to any person to whom this Letter of Offer is made or the non-receipt of this Letter of Offer by any such person shall not invalidate the Offer in any way. The instructions, authorisations and provisions contained in the Form of Acceptance constitute an integral part of the terms of this Offer. The acceptance of the Offer must be unconditional and should be sent in the attached Form of Acceptance along with the other documents duly filled in and signed by the applicant. Shareholder(s) which should be received by the Registrar to the Offer at the collection centres mentioned under “Procedure for Acceptance and Settlement” on or before Tuesday, February 4, 2003. If any change or modification is made in the Form of Acceptance, the same is liable to be rejected. Barring unforeseen circumstances, factors beyond its control and subject to obtaining FIPB and RBI approvals, the Acquirer intends to complete all formalities pertaining to the purchase of the Shares, including dispatch of consideration to the Shareholders who have accepted the Offer, by Thursday, March 6, 2003. 14 (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) While tendering Shares under the Offer, NRIs/OCBs/foreign Shareholders will be required to submit the previous RBI approvals (specific or general) that they would have obtained for acquiring shares of Target Company and a NOC/Tax Clearance Certificate, indicating the amount of tax to be deducted by the Acquirer before remitting the consideration, from the Income-Tax authorities under the Income-tax Act, 1961. In case the previous RBI approvals are not submitted, the Acquirer reserves the right to reject the Shares. In case the aforesaid NOC/Tax Clearance Certificate is not submitted, the Acquirer will arrange to deduct tax at the maximum marginal rate as may be applicable to the category of the Shareholder, on the entire consideration amount payable to such Shareholder. (m) In case RBI approval for acquisition of Shares from non-resident Shareholders is unduly delayed, the Acquirer reserves the right to proceed with payment to the resident Shareholders whose Shares have been accepted by the Acquirer in terms of this Offer, pending payment to the non-resident Shareholders, subject to the entire amount payable to nonresident Shareholders being kept in an Escrow Account whose value can be realised by the Manager as per the Regulations. (n) The acceptance of the Offer made by the Acquirer is entirely at the discretion of the Shareholders. The Acquirer will not be responsible in any manner for any loss of equity share certificate(s) and offer acceptance documents during transit and the Shareholders of the Target Company are advised to adequately safeguard their interest in this regard. As already mentioned elsewhere in this Letter of Offer, the Offer is not subject to any minimum level of acceptance from the Shareholders. Thus, the Acquirer will proceed with the Offer even if it is unable to obtain acceptance to the full extent of the Shares of the Target Company for which this Offer is made. Shares that are subject to any charge, lien or encumbrance are liable to be rejected. The Acquirer reserves the right of upward revision of the Offer Price at any time up to seven working days prior to the closure of the Offer, as per Regulation 26 of the Regulations. The same price would be paid by the Acquirer for all the Shares tendered any time during the Open Offer. The information about such revision(s) if any, would appear in the same newspapers in which Public Announcement has appeared. Shareholders who accept the Offer by tendering the requisite documentation, in terms of this Letter of Offer cannot withdraw the same. (o) (p) (q) (r) 11. PROCEDURE FOR ACCEPTANCE AND SETTLEMENT Shareholders of Target Company, who wish to avail this Offer should forward the under mentioned documents by hand delivery or by registered post to the Registrar to the Offer at its office at 21, Avenue 4, Street No. 1, Banjara Hills, Hyderabad500 034 (Tel: (+91 40 2331 2454), Fax: (+91 40 2331 1968), Email: murali@karvy.com Contact Person: Mr. Muralikrishna), or by hand delivery only at the collection centres given below so as to reach the Registrar on or before Tuesday, February 4, 2003 (closure date of the Offer) on their working days during business hours indicated in the table under sub-para (d) below. In the case of demat Shares, the Registrar is not bound to accept those offers which have not yet been credited to the DP as on the date of closure of the Offer, i.e. Tuesday, February 4, 2003 For Shares held in physical form q Form of Acceptance duly completed and signed in accordance with the instructions contained therein, by sole/all Shareholders whose names appear on the share certificates (in case of joint holdings) in the same order in which their names appear in the Register of Members. Original Share Certificate(s). Valid Share Transfer deed(s) duly signed as transferors by all Shareholders (in case of joint holdings) in the same order and as per specimen signatures lodged with Target Company and duly witnessed at the appropriate place by a Notary or Bank Manager or Member of Stock Exchange under their seal of office and membership number. The Transfer Deed should be left blank, excepting the signatures as mentioned above. Documents mentioned in para(c) of this section,for NRI/OCB/FII shareholders. q q q 15 For Shares held in demat form q Form of Acceptance duly completed and signed in accordance with the instructions contained therein, by sole/all Shareholders whose names appear (in case of joint holdings) in the same order in which their names appear in their beneficiary account. The Form of Acceptance has to be tendered by the beneficial holder of Shares only. A photocopy of the Delivery Instruction duly acknowledged by the DP filled as per the instructions given hereunder: Registrar to the Offer has the Depository Escrow Account with Karvy Consultants Limited named as “Karvy Consultants Ltd. (KCL Escrow A/C- Widia Open Offer)” as per details given below: Depositary: Depository Participant Name: Client ID Number: DP ID Number: NSDL Karvy Consultants Limited 11981824 IN300394 q q Shareholders having their beneficiary account in CDSL have to use inter-depositary delivery instruction slip for the purpose of crediting their Shares in favour of the special depository account with NSDL. — The beneficial owners who hold Shares in demat form are required to execute a trade by tendering the Delivery Instruction for debiting their beneficiary account with the concerned DP and crediting the abovementioned account. The credit in the Depository Escrow Account should be received on or before the date of closure of the Offer, i.e. Tuesday, February 4, 2003. The Delivery Instructions to be given to the DP should be in “For Off Market Trade” mode only. For each Delivery Instruction the beneficial owner should submit a separate Form of Acceptance. — q Documents mentioned in para (c) of this section, for NRI/OCB/FII Shareholders These Shares would be held in trust by the Registrar till the time payment for the same is made by the Acquirer and the Acquirer would have no access to these shares till that time. The above documents should not be sent to the Acquirer or Target Company or the Manager to the Offer. The same should be sent to the Registrar to the Offer at collection centres given below. (a) All Shareholders can participate in the Offer. Unregistered owners can send their application in writing to the Registrar to the Offer. They are required to submit, besides the documents as mentioned above, other documents to prove their title to the Shares offered for acceptance, such as original brokers contract note, transfer deed(s) executed by the registered holders of the Shares in addition to the Form of Acceptance and share certificate(s). No indemnity is required from unregistered Shareholders. Unregistered owners, if they so desire, may also apply on the Form of Acceptance downloaded from SEBI’s website (www.sebi.gov.in). Notwithstanding that the signature(s) of the transferor(s) have been witnessed as aforesaid, if the signature(s) of the transferor(s) differs from the specimen signature(s) recorded with Target Company or are not in the same order, such Shares are liable to be rejected under this Offer even if the Offer has been accepted by a bona fide owner of such Shares. In case of non-receipt of the Letter of Offer, Shareholders may send their acceptance to the Registrar to the Offer, on a plain paper stating the Name, Address, No. of Shares held, Distinctive Nos., Folio No., No. of Shares offered, along with documents as mentioned above, so as to reach the Registrar to the Offer on or before the close of the Offer. No indemnity is required in this regard. Shareholders who have lodged their Shares for transfer with the Target Company must also send the acknowledgement received from the Target Company towards such lodging of Shares, if any. Non-Residents should also enclose copy of permission received from RBI for the shares held by them in Target Company and NOC/ Tax Clearance Certificate from the Income-tax Authorities under Income-tax Act, 1961, indicating the amount of tax to be deducted by the Acquirer before remitting the consideration. In case the aforesaid NOC/ Tax Clearance Certificate is not submitted, the Acquirer will arrange to deduct tax at the maximum marginal rate as may be applicable to the category of the Shareholder, on the entire consideration amount payable to such Shareholders. The Shareholders should also provide all relevant documents, which are necessary to ensure transferability of the 16 (b) (c) (d) Shares in respect of which the application is being sent. Such documents may include, but are not limited to: i) ii) iii) iv) v) duly attested death certificate and succession certificate (in case of single Shareholder) if the original Shareholder is deceased; duly attested Power of Attorney if any person apart from the Shareholder has signed the application form and/or transfer deed(s); no objection certificates from the charge holder/lender, if the shares in respect of which the application is sent, are under any charge, lien or encumbrance; in case of companies, the necessary corporate authorisation (including Board Resolutions); any other relevant documentation. The documents referred to above should be sent to any of the following collection centres of the Registrar: City Mumbai Address 16-22 BAKE HOUSE, Maharashtra Chamber of Commerce Lane, Fort, Mumbai – 400 023 7, Andheri Industrial Estate, Off Veera Desai Road, Andheri (West), Mumbai – 400 053 49, Jatin Das Road, Kolkata – 700 029 G-1, Swathi Court, 22, Vijayaraghava Road, T Nagar, Chennai – 600 017 105-108, Arunachal Bldg, 19, Barakhamba Road, Connaught Place, New Delhi – 110 001 Tel No.(s) Fax No.(s) Contact Person Mode of Delivery Hand Delivery (022) 56381746/ (022) 56331135 Ms. Varija Kotian 7/8/9 Mumbai (022) 26730799/ (022) 26730152 Ms. Vishaka 26730843 Hand Delivery Kolkata (033) 4644891/ 7231/4634788 (044) 8153445 (033) 4644866 Mr. Sujit Kundu Hand Delivery Chennai (044) 8153181 Mr. Alex Cherian Hand Delivery New Delhi (011) 3324401 (011) 3324621 Mr. Michael George Hand Delivery Ahmedabad 201-203 “SHAIL” (079) 6420422/ Opp : Madhusudhan House, 6400527 Nr. Navarangpura Tele Exchange Off : C G Road, Ahmedabad – 380 006 Vadodara Sharad Apartment,Gr.Flr, Off :Rama Inn Hotel, Vadodara – 390 005 1202/10, Vishwas Bunglow, Off.Ghole Road, Nr. Hotel Surya, Shivaji Nagar, Pune – 411 004 (0265) 362622/ 224469/70 (079) 6565551 Mr. Jayesh Shah Hand Delivery (0265) 363207 Mr. Shobhan Doshi Hand Delivery Pune (020) 5530204/5 (020) 5533292 Mr. Digamber Pawar Hand Delivery 17 City Bangalore Address T K N Complex, No.51/2, Vanivilas Road, Opp.National College, Basavanagudi, Bangalore – 560004 21, Avenue 4, Street No.1, Banjara Hills, Hyderabad – 500 034 M/7, Empire State Bldg., Ring Road, Nr. Udhana Darwaja Surat – 395 002 Tel No.(s) (080) 6621184/ 1192 Fax No.(s) (080) 6621169 Contact Person Ms. Shashikala Mode of Delivery Hand Delivery Hyderabad (040) 23312454/ (040) 3311968 23320251 Mr. Nagesh Rao Registered Post or Hand Delivery Hand Delivery Surat (0261) 8357356/ (0261) 8368693 Mr. Kirit Shah 1976 Business Hours : Monday to Saturday: 10.00 a.m. to 3.00 p.m. Holidays : Sundays and Bank Holidays Applicants may send their documents only by Registered Post, at their own risk, if not hand delivered, to the Registrar, Karvy Consultants Limited, 21, Avenue 4, Street No. 1, Banjara Hills, Hyderabad-500 034 (Tel: (+91 40 2331 2454), Fax: (+91 40 2331 1968), Email: murali@karvy.com Contact Person: Mr. Muralikrishna.) during business hours indicated above, other than on holidays. (e) Applications in respect of shares that are the subject matter of litigation wherein the shareholder(s) may be precluded from transferring the shares during the pendency of the said litigation are liable to be rejected in case directions/ orders regarding these shares are not received together with the shares tendered under the Offer. The Letter of Offer in some of these cases, wherever possible, would be forwarded to the concerned statutory authorities for further action at their end. Shareholders who have sent their shares for dematerialization need to ensure that the process of getting shares dematerialized is completed well in time so that the credit in the Registrar’s Escrow Account should be received on or before the date of closure of the offer, i.e. February 4, 2003, else the application would be rejected. Payment of consideration will be made by crossed account payee cheques/demand drafts and sent by registered post and/or courier in case of consideration amount exceeding Rs.1,500/- (Under Certificate of Posting otherwise) to those Shareholders whose Share certificates and other documents are found in order and accepted by the Acquirer. All cheques/demand drafts will be drawn in the name of the first holder, in case of joint registered holders. In case of physical Shares, the Registrar to the Offer will hold in trust the Share certificates, Form of Acceptance duly filled in and the transfer deed/s on behalf of shareholders of Target Company who have accepted the Offer, till the cheques/drafts for the consideration and/or the share certificates are posted. In case of dematerialised Shares, the Shares would reside in the Depository Escrow Account as mentioned above. The Registrar to the Offer will debit the Depository Escrow Account to the extent of payment of consideration made by the Acquirer and give instructions for credit of the beneficial account of the Acquirer. Barring unforeseen circumstances, factors beyond their control and subject to obtaining FIPB and RBI approvals, the Acquirer intends to complete all formalities pertaining to the purchase of the Shares, including payment of consideration to the Shareholders who have accepted the Offer by Thursday, March 6, 2003. In case of physical shares where acceptances are rejected, the rejected Share certificates, transfer deeds and other documents, if any, will be returned by registered post by the Registrar to the Offer to the Shareholders/unregistered owners. The Shares held in dematerialised form to the extent not accepted under the Offer will be released to the beneficial owner’s depository account with the respective DP as per details furnished by the beneficial owner in the Form of Acceptance, at the sole risk of the beneficial owner. An intimation to that effect will be sent to the beneficial owner by ordinary post. For the Shares lying in the Depository Escrow Account, the Registrar shall take action for transferring the shares to Acquirer after payment consideration cheques are released to the beneficial owners. 18 (f) (g) (h) (i) (j) (k) 12. COMPLAINTS/COMMUNICATIONS WITH RESPECT TO THE OFFER Various complaints/communications have been received by the Manager from the shareholders / forwarded by SEBI. The complaints/communications have been received from M/s. Custodians vide letters/faxes dated 15/11/2002, 18/11/2002, 19/11/2002, 22/11/2002, 25/11/2002, 29/11/2002 and 9/12/2002; Taurus Stock Broking Pvt. Ltd. vide letter dated 14/11/02; N.P . Shah vide letter/email dated 2/12/2002; K.R. Shah vide letter/fax dated 2/12/2002; D.Y. Doshi vide letter/fax dated 21/11/2002 and Y.R. Doshi vide letter/fax dated 20/10/2002. Since many issues raised in these letters were similar,the gist of various complaints / communications received by the Manager of the Offer, along with the Acquirer’s comments / response is stated below: Gist of complaints/communications n n Open Offer price should be calculated as per the revised delisting norms with reference to reverse book building Price of the Open Offer should be reconsidered based on the reference date and the date of the public announcement Price of the Open Offer should be reconsidered based on the increased volatility in share price Copy of agreement between Milacron & SAK Industries Ltd. and between the Acquirer and Milacron group Copy of Valuation report/certificate of the Target Company carried out by the Acquirer prior to entering into the global transactions. Copy of Due Diligence Valuation exercise carried out by the Acquirer with respect to Milacron’s European operations Price paid by the Acquirer to Indian Promoters Voting rights of tendered shares in case FIPB permission is not received in time Payment to SAK Group by Milacron or the Acquirer as compensation under any head n n n n n n n n n n n n n Acquirer’s response/comments The Open Offer price was calculated as per SEBI’s detailed order No.CO/296/TO/10/2002 dated October 23, 2002. A copy of this order is available on the internet at SEBI’s website at http://www.sebi.gov.in. All the documents, as required by law/ directed by SEBI to be furnished to the shareholders and to be listed in the Letter of Offer and directed by SEBI to be furnished to the shareholders, will be made available to the shareholders of the Target Company, for inspection, on the Letter of Offer being finalized and dispatched to shareholders. The Acquirer did not prepare, nor did it request an external firm to prepare, a valuation report of the Target Company prior to entering into the Stock Purchase Agreement with Milacron B.V. and Milacron Inc. The open offer has been made pursuant to an indirect change in control and no shares have been acquired by the Acquirer from the Indian promoters. The shareholders participating in the open offer will continue to have voting rights till the time the shares are not transferred to the Acquirer, and such transfer will be completed only after receipt of FIPB approval and dispatch of the payment consideration. At the time of the global transaction, Meturit AG, being a subsidiary of Milacron B.V., was a part of Milacron group. Meturit AG has paid Rs.76.28 per share as directed by RBI for purchase of the shares aggregating 25.68% of the equity capital held by SAK Industries Limited in the Target Company. Meturit AG/ Milacron have paid a settlement consideration of US$ 13,688,385 to SAK Industries Limited for the following but not limited to: — Settlement of Civil Suit filed by SAK Industries Limited in the Bangalore City Civil Court (O.S. No. 15193/2002) seeking a judgement and declaration that SAK Industries Limited has a preemption right and/or a right of first refusal in respect of a direct or indirect sale, transfer etc. of the ‘A’ series equity shares and/or beneficial controlling interest therein and for permanent injunction restraining Meturit AG from transferring the ‘A’ series equity shares of the Target Company — Termination of Shareholders Agreement between Meturit AG and SAK Industries Limited — Waiver of rights against the Target Company by SAK Industries Limited — Co-operation for implementation of the Global Transaction i.e. sale of the said businesses by Milacron to the Acquirer — Execution of a non-compete agreement between Meturit AG and SAK Industries Limited. 19 13. DOCUMENTS FOR INSPECTION The following documents will be available for inspection to the shareholders of Target Company at the Registered Office of Target Company, whose address is given on the cover page of this document, between 10 a.m. and 5 p.m. on all working days except Saturdays till the closure date of the Offer (i.e. Tuesday, February 4, 2003): 1. 2. 3. 4. 5. 6. 7. 8. 9. Certificate of incorporation and By-Laws of the Acquirer. Certificate of incorporation, Memorandum and Articles of Association of Target Company. Certificate dated November 12, 2002 by JP Morgan Chase Bank, regarding the adequacy of financial resources with the Acquirer to fulfill the Offer obligations. Audited accounts of Target Company for the accounting years ended December 31, 2001, December 31, 2000 and December 31, 1999. Audited accounts of Acquirer for the financial years ended June 30, 2002, June 30, 2001, and June 30, 2002. Copy of letter from JP Morgan Trust Company, National Association dated November 7, 2002 confirming the deposit of US$ 86,000 being over 1% cash deposit, into the Bank Account. Escrow Agreement entered between Acquirer, Standard Chartered Bank, India and JM Morgan Stanley Private Limited. Copy of Bank Guarantee No. 529020119623-HO for Rs. 102,944,696.0 dated November 13, 2002 issued by Standard Chartered Bank, India favoring the Manager to the Offer. Copy of letter received from SEBI, No. TO/RC/24789/02 dated December 20, 2002, in terms of proviso to Regulation 18(2). 10. Copy of Public Announcement made on November 15, 2002 by the Acquirer for acquiring up to 5,124,480 fully paid up Shares of the Target Company. 11. Letters from BSE, BgSE, MSE, DSE, containing the Share price and volume data. 12. Copies of the application made to the FIPB, letter from Department of Heavy Industries, Government of India to Widia India Limited and Birla Kennametal Limited and in case the approvals from the FIPB and RBI are received prior to the Offer Closing Date, copies of the same shall also be made available. 13. Copy of the documents entered into with Depository participant for opening a special depository Escrow account for the purpose of the Offer. 14. Stock Purchase Agreement between Acquirer and Milacron Inc. and Milacron B.V. dated May 3, 2002. 15. Correspondence with Mr. Yash Birla regarding NOC as required under the FIPB guidelines. 14. RESPONSIBILITY STATEMENT The Acquirer accepts full responsibility for the information contained in this Letter of Offer and Form of Acceptance. The Acquirer shall be jointly and severally responsible for ensuring compliance with the Regulations. All information contained in this document is as on the date of the Public Announcement, unless stated otherwise. Mr. Kevin G. Nowe, Assistant Secretary, has been authorised by the Acquirer to sign the Letter of Offer. By the Order of the Board, For Kennametal Inc. sd/Kevin G. Nowe, Assistant Secretary Place Date : Latrobe, Pennsylvania, USA : December 30, 2002 Attached: Form of Acceptance-cum-Acknowledgement 20