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Aditya Birla Group merges apparel businesses to form Rs 5,290-crore entity

The Group on Sunday merged its apparel businesses into a Rs 5,290 crore entity named Aditya Birla Fashion and Retail (ABFRL), which will be the largest fashion lifestyle company in the the country.

twitter-logo PTI   Mumbai     Last Updated: May 4, 2015  | 08:34 IST
Aditya Birla Group Chairman Kumar Mangalam Birla
The new company will be the largest not only in the listed but also in the non-listed space," Group Chairman Kumar Mangalam Birla told reporters in Mumbai on Sunday.

In a major consolidation exercise, Aditya Birla Group on Sunday merged its apparel businesses into a Rs 5,290 crore entity named Aditya Birla Fashion and Retail (ABFRL), which will be the largest pure-play fashion lifestyle company in the the country.

Under the scheme of arrangement approved on Sunday by the boards of respective companies, the apparel businesses of group holding company Aditya Birla Nuvo (ABNL) and of another group firm Madura Garments Lifestyle Retail Company (MGLRCL) would be demerged into listed firm Pantaloons Fashion & Retail (PFRL).

"We are combining businesses of Madura Garments and Pantaloons from Aditya Birla Nuvo through a process of a vertical demerger and creating a listed apparel retail company.

The new company will be the largest not only in the listed but also in the non-listed space," Group Chairman Kumar Mangalam Birla told reporters in Mumbai on Sunday.

The new entity will have a retail network of 1,869 exclusive stores.

According to analysts, the combined entity will have a revenue of over Rs 6,000 crore.

Birla further said that the Group has created a structure where shareholders of ABNL will get a direct shareholding in the apparel business through ABFRL.

According to the swap-ratio recommended by two independent valuers - Price Waterhouse and Co LLP and Bansi Mehta and Co - shareholders of ABNL will get 26 new equity shares of PFRL for every 5 equity shares held in ABNL, pursuant to the demerger of Madura Fashion.

Shareholders of MGLRCL will get 7 new equity shares of PFRL for every 500 equity shares held in MGLRCL, pursuant to the demerger of Madura Lifestyle.

Preference shareholder of MGLRCL will get 1 new equity share of PFRL.

The transaction, which is subject to corporate and regulatory approvals, is likely to be completed in next 6 to 9 months.

After the completion of the transaction and issuance of new shares, the existing base of 9.28 crore equity shares of PFRL will go up to 77.28 crore equity shares.

A shareholder holding 100 shares in ABNL will continue to hold 100 shares in ABNL and in addition will get 520 shares of PFRL.

Despite repeated queries on the deal size, Birla declined to comment on the same.

ABFRL will have presence across formats in the apparel industry.

When asked whether the Group will bring in more number of retail companies in phases in the near future, Birla said there was no plan to do so.

On capital infusion, he said the new entity would not require any additional funding.

"This business generates strong cash flow and I believe that it can use its own internal accruals to fuel its own growth plan. It doesn't require any funding beyond that," Birla added.

The transaction advisor to the deal was Standard Chartered Bank while the independent fairness opinion to ABNL was given by Axis Capital.

Commenting on the merger, J M Financial, who gave independent fairness opinion to PFRL, said, "This creates the leading branded fashion and retail business in the country.

"The size of 5 million sq ft and 1,800 plus stores along with the expansion and synergies would make this an extremely attractive investment opportunity for domestic and foreign investors."

After the completion of the transaction and issuance of new shares, the existing base of 9.28 crore equity shares of PFRL will go up to 77.28 crore equity shares.

A shareholder holding 100 shares in ABNL will continue to hold 100 shares in ABNL and in addition will get 520 shares of PFRL.

Despite repeated queries on the deal size, Birla declined to comment on the same.

ABFRL will have presence across formats in the apparel industry.

When asked whether the Group will bring in more number of retail companies in phases in the near future, Birla said there was no plan to do so.

On capital infusion, he said the new entity would not require any additional funding.

"This business generates strong cash flow and I believe that it can use its own internal accruals to fuel its own growth plan. It doesn't require any funding beyond that," Birla added.

The transaction advisor to the deal was Standard Chartered Bank while the independent fairness opinion to ABNL was given by Axis Capital.

Commenting on the merger, J M Financial, who gave independent fairness opinion to PFRL, said, "This creates the leading branded fashion and retail business in the country.

"The size of 5 million sq ft and 1,800 plus stores along with the expansion and synergies would make this an extremely attractive investment opportunity for domestic and foreign investors."

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