The LML-Piaggio Break-Up|Business Strategy|Case Study|Case Studies

The LML-Piaggio Break-Up

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Case Details:

Case Code : BSTR006
Case Length : 7 Pages
Period : 1998-1999
Organization : LML, Piaggio
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Auto and Ancillaries

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The structure called LML was created by me. I brought Piaggio into the joint venture by giving them equity."

- Deepak Singhania's (Managing Director, LML Ltd.) comment on Piaggio's attempt to purchase LML's stake in the joint venture.

"The agreement had been wrongly understood. We will fight the case since we have no inclination of selling our stake in LML."

- Mario Emprin Gilandin, Resident Manger, Piaggio India.

On June 23, 1998, Deepak Singhania (Singhania), managing director, LML Ltd., received letters from two companies of the Piaggio Group.

The letters curtly informed him that four of the group companies would be merged with Piaggio & C SpA1 on July 1, 1998, under a restructuring plan.

There had also been a change in the shareholding pattern.

Singhania immediately sensed that the reorganization and the changing shareholding pattern of Piaggio & C SpA would strengthen the anti-Singhania faction in Piaggio. Proactively, Singhania invoked certain articles of the joint venture agreement with Piaggio. He contended that he had the right to buy out Piaggio's stake in LML.

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According to him, the demise of Giovanni Alberto Agnelli2 (Giovanni) triggered an event that gave LML the right to purchase Piaggio's stake.

He took the matter to the court of the civil judge (Senior Division) Kanpur. Singhania's petition contended that Piaggio should be forced to sell its stake.

During the same time, Piaggio moved the International Court of Arbitration (ICA), Paris, contesting Singhania's claim. The Kanpur court gave an interim order restraining both LML and Piaggio from selling their holdings. This sequence of claims and counter-claims by LML and Piaggio continued for more than a year. In November 1999, the partners finally entered into a 'good-faith out-of-court settlement' under which LML bought Piaggio's stake...

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1] The holding company of the Piaggio Group.

2] Giovanni was the then Chairman of the Piaggio Group, who died in December 1997.


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