The Aditya Birla Nuvo Ltd (ABNL) on Monday approved the proposed acquisition of a controlling stake in the Kishore Biyani promoted Future Group's Pantaloon Format business, post its demerger from Pantaloon Retail (India) Ltd (PRIL).
The board of directors of ABNL, at its meeting on Monday, took a decision in this regard, according to a company statement.
Mr Kumar Mangalam Birla, Chairman, ABNL, said the proposed acquisition is in line with the Group's strategic intent to be on the top of the league and to create the largest integrated branded fashion player in the country through an extension into the value segment.
“This acquisition will catapult ABNL to the pole position in the branded fashion space in all the segments with a pan India presence.”
On completion of the acquisition, the two entities, viz. ABNL's Madura Fashion & Lifestyle and PRIL will work closely as partners to derive operational synergies, in terms of back-end, supply chain and many other important value drivers of the business. “We are delighted to have Mr Kishore Biyani as our partner in the Pantaloons Format business. Furthermore, to ensure continuity the current management team will continue to run the business,” added Mr Birla.
With this acquisition, ABNL will have multiple brands, store formats and a complete range across categories – casual wear, ethnic wear, formal wear, party wear and sports wear for Men, Women and Kids.
Both ABNL and PRIL have a common shared vision of creating value for their multiple stakeholders, he said. ABNL's Madura Fashion & Lifestyle, in the calendar year 2011, recorded revenues of Rs 2,145 crore. Its leading brands span a retail space of 1.6 million sq. ft across the country whereas Pantaloons Format business is spread over 2.05 million sq. ft.
The proposed transaction is likely to be completed within 8 to 10 months, subject to the finalisation of the Scheme of Arrangement, due diligence and statutory and other requisite approvals. Accordingly, PRIL will issue debentures to ABNL worth Rs 800 crore on mutually agreed terms, convertible in the equity shares of the resulting entity, i.e. Pantaloons Format business.
Also, PRIL will demerge its Pantaloons Format business through a court scheme of arrangement and transfer the net assets of its business, and its apportioned debt of Rs 800 crore to the resulting entity. ABNL will make an open offer of a minimum 26 per cent to the shareholders of the resulting entity. After listing of the resulting entity and on conversion of debentures into equity, ABNL's holding in the resulting entity post open offer shall be a minimum of 50.01 per cent. The resulting entity will become a subsidiary of ABNL.