The Birlas today announced a plan to merge Aditya Birla Nuvo-owned fashion retailing business with Pantaloons Fashion & Retail - thus creating India’s largest branded apparel player valued at Rs 12,000 crore. As per the plan, Madura Fashion, the branded apparel retailing division and Madura Lifestyle, the luxury branded apparel retailing of Aditya Birla Nuvo will be demerged into its listed subsidiary - Pantaloons Fashions.
Post restructuring, Pantaloons Fashion & Retail will be renamed as ‘Aditya Birla Fashion & Retail Limited’ and have 1,900 stores across India. The combined entity will have a debt of Rs 1,775 crore as debt of around Rs 475 crore will be passed on from Madura to Pantaloons Fashion.
As per the merger scheme, shareholders of Aditya Birla Nuvo will get 26 new equity shares of Pantaloons Fashion for every 5 equity shares held in ABNL following the demerger of Madura Fashion. Similarly, shareholders of Madura Garmenls Lifestyle will get 7 new equity shares of Pantaloons for every 500 equity shares held in Madura Garment Lifestyle pursuant to the demerger of Madura Lifestyle. The preference shareholder of Madura Garments Lifestyle will get 1 new equity share of PFRL. Post deal, Pantaloon's equity base will increase from 9.28 crore to 77.28 crore shares.
“The idea is to unlock value for our shareholders in both Aditya Birla Nuvo and for Pantaloons Fashion,” said Kumar Mangalam Birla, Chairman of Aditya Birla group here today. Birla said the fashion retailing is doing far better than the economy with revenues of the combined entity growing by 40 per cent and Ebitda growing by 43 per cent in the last two years.
With this restructuring, a ABNL shareholder holding 100 shares will continue to hold its 100 shares in ABNL and in addition will get 520 shares of PFRL. The promoters would own close to 60% stake in Pantaloons after the restructuring from the present 72%. The group decided to keep its “More” branded grocery stores out of the merger scheme announced today and Birla said it will not offer any stake to private equity players in the new company.
“This consolidation will create India’s largest pure play fashion and lifestyle company with a strong bouquet of leading fashion brands and retail formats. This move brings India’s No 1 branded mens wear and women wear players together,” Birla said. Birla said internal accruals of the company are enough to fund its growth plans and the transaction will be completed in the next 6-9 months.
“Investors of AB Nuvo have been asking for a de-merger for a long time. This entity will create the largest pure play fashion company in the company and it will remove the holding company discount of Aditya Birla Nuvo,” Birla said. The Pantaloon brand will continue at the stores level though the company’s name will change. The debt to equity ratio of Pantaloons will improve after the scheme.
“This will also bring all the branded apparels businesses under one roof and accelerate the growth of these businesses and help exploit emerging opportunities presented by the rapidly growing Indian apparel market,” Pranab Barua, Business Director, Apparel & Retail business said.
The consolidation would also enable tapping of operational synergies on various fronts such as sourcing, real estate and technology platforms, the group said in a release.
Standard Chartered Bank was the advisor for the transaction while Price Waterhouse & Co. LLP and Bansi S. Mehta & Co were the valuers.
Pantaloons’s New Avataar (Post merger)
Revenue: Rs 4759 cr (FY 2014)
Ebitda: Rs 401 cr (FY 2014)
Revenue: Rs 4047 cr (9 months FY 2015)
Ebitda: Rs 383 crore (9 months FY 2015)
Win-Win deal
- AB Nuvo shareholders to get 26 new equity shares of Pantaloons Fashion for every 5 equity shares held
- Madura Garments Lifestyle shareholders to get 7 new equity shares of PFRL for every 500 shares held
- Preference shareholder of Madura Garments Lifestyle to get 1 new equity share of Pantaloons
- Pantaloons to be renamed as Aditya Birla Fashion & Retail
- Merged entity valued at Rs 12,000 crore
- Value unlocking for Aditya Birla Nuvo shareholders
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