The Hindu Business Line : Meridian Ind to merge with Precot Mills

Meridian Industries Ltd, an unlisted textile company belonging to the Coimbatore-based Precot group, will merge with the group's flagship Precot Mills Ltd. The boards of Meridian and Precot Mills, which met here, have given `in principle' approval for the merger proposal.

The effective date of the merger of the two companies has been fixed as April 1, 2006, sources at Precot Mills told Business Line.

The merger is intended to gain higher manufacturing capacity, turnover and improved financials for the merged entity as both Precot and Meridian are almost involved in identical line of manufacture at present.

Promoted in 1993, Meridian Industries produces cotton yarn for hosiery application and it has 33,000 spindles and 192 rotors. Its production facility is situated in the nearby Pollachi taluk.

A profit-making unit, Meridian Industries has an equity base of Rs 3 crore and over 70 per cent of the company's shares are held by the shareholders of the group companies including Precot Mills.

Capacity to rise

Sources said the merger of the companies would result in a 30 per cent rise in the production capacity of Precot so also the turnover of the merged company. Precot Mills, during the first nine months of current year operations ended December 31, 2005, had shown a profit after tax of Rs 10.93 crore while Meridian Industries had reported a net profit of Rs 4.27 crore.

The independent accounting firm Deloitte Haskins and Sells will take up the valuation of the companies and determine the share swap ratio. The process of valuation and ratio fixation is expected to be completed in a fortnight's time and the same would be ratified by the company, sources added.

Precot is a vertically integrated textile manufacturer with 1.26-lakh spindles/1,344 rotors and 88 looms and is listed with the National Stock Exchange Ltd. The company has chalked out capacity expansion including high-valued garment making plans at a cost of Rs 90 crore.

More Stories on : Mergers & Acquisitions | Textiles

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