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Meghna \n Maiti, Yassir A Pitalwalla, Financial Chronicle<\/i><\/p>\n Meghna \n Maiti, Yassir A Pitalwalla, Financial Chronicle<\/i><\/p>\n
Mumbai, \n April 30, 2012<\/i><\/p>\n
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Kumar \n Mangalam Birla has done what Mukesh Ambani could not. Birla has \n sewn up a deal to acquire a 50.01 per cent in Pantaloons, the \n retail format of Pantaloon Retail India (PRIL). For this, Pantaloons \n will be demerged from PRIL.<\/p>\n
It is a two-stage deal involving a Rs 800 crore cash payment, \n assumption of a similar amount of debt and an open offer for a \n minimum 26 per cent to shareholders of the demerged Pantaloons \n format-owning company.<\/p>\n
The Future group on Monday said it intended to demerge the Pantaloon \n retail format from the listed PRIL. The demerged entity will be \n automatically listed in the National Stock Exchange (NSE) and \n the Bombay Stock Exchange (BSE), said a press release issued by \n the Birla group.<\/p>\n
Officials associated with the deal told Financial Chronicle that \n the Pantaloons format was being valued at over Rs 2,600 crore. \n PRIL’s market capitalisation was Rs 3,895 crore at the end \n of Monday.<\/p>\n
“It is a good deal for the shareholders. Since a sizeable \n business is going out of the group, there could be a dent on future \n numbers,” said Sangeeta Tripathi, senior equity research \n analyst at Sharekhan.<\/p>\n
But Kishore Biyani of PRIL will still retain a stake in the fashion \n retail business through formats such as Central, Big Bazaar and \n Brand Factory, among others.<\/p>\n
Devangshu Dutta, CEO of Third Eyesight, a specialist retail \n consultancy firm, said, “Certainly, by hiving off part of \n the company, the Future group will pay off debt and ease the load \n on it to an extent.”<\/b><\/p>\n
The demerged unit is expected to have sales of Rs 1,700 crore \n in the year to June 30 this year. It is also expected to expand \n its network by around 20 stores a year.<\/p>\n
In contrast, the Aditya Birla Nuvo (ABN) subsidiary Madura Fashion \n & Lifestyle recorded revenue of Rs 2,145 crore in calendar \n 2011. A Future group press release said that Nimesh Kampani’s \n JM Financial acted as the sole financial adviser to the transaction.<\/p>\n
“This is a very interesting combination and shows consolidation \n is happening in the industry. The cash infusion will help PRIL \n focus on the food business and make its balance sheet healthy,” \n said Nikhil Chaturvedi, managing director of Provogue (India).<\/p>\n
“The retail business is very time consuming and needs deep \n pockets. The deal shows that Biyani must have taken a decision \n to become debt free. The Birlas will have better controls and \n will be able to extract better margins from this business,” \n said Dilip B Jiwrajka, MD of Alok Industries which controls the \n H&A chain of apparel stores.<\/p>\n
The deal brings together the first generation Biyani family that’s \n behind India’s largest organised retailer and the Birla family, \n which runs the $35 billion Aditya Birla group. It is a win-win \n transaction for Birla who gets the most profitable fashion retailing \n business of PRIL. As for PRIL, which had a debt of Rs 4,200 crore, \n it gets to reduce its net debt load by Rs 1,600 crore to Rs 2,600 \n crore.<\/p>\n
“This deal is positive for the industry as Madura has experience \n in fashion retailing. This will be a good extension for the Birlas, \n as they are putting in money in an established store chain. The \n Birlas will also be able to push their own brands through these \n stores,” said Asim Dalal, managing director of The Bombay \n Store.<\/p>\n
“PRIL has always been vocal about debt-restructuring. This \n is a good step towards re-aligning the organisation,” said \n Saloni Nangia, senior VP of Technopak Advisors.<\/p>\n
ABN will pay PRIL Rs 800 crore in lieu of debentures, which will \n get converted, into equity of the demerged entity. PRIL, in turn, \n will transfer the net assets of the Pantaloons format business \n via a court scheme of arrangement with debt of Rs 800 crore and \n Rs 800 crore convertible debentures.<\/p>\n
ABN will make an open offer for a minimum 26 per cent of shares \n in the de-merged entity so as to ultimately hold a minimum 50.01 \n per cent of the spun-off unit post conversion of the debentures.<\/p>\n
Biyani, who founded the Future group and is its CEO, said in \n a statement, “We are honoured to be associated with India’s \n pre-eminent and among the most respected business houses. We always \n had a great admiration and respect for the businesses developed \n by Madura Garments. This marks a unique coming together of brands \n and enterprise that will create significant value for customers, \n suppliers and all stakeholders.”<\/p>\n
“There are massive synergy benefits between Pantaloons and \n Birla’s Madura Fashion & Lifestyle. The combined business \n will cater to the entire value chain of consumers from the value \n conscious middle class to top end customers,” said a senior \n official involved in the deal who requested anonymity as both \n Pantaloons and Aditya Birla Nuvo are in a silent period ahead \n of their results announcements for the quarter ended March.<\/p>\n
Biyani started his retail sojourn in Kolkata with the first Pantaloons \n store in 1997 and the format has been very close to his heart. \n It operates a chain of 65 stores in 35 cities and another 21 Pantaloons \n factory outlets, making it one of the biggest fashionb retailers \n India. It has a combined retail space of over 2 million sq ft.<\/p>\n
Madura’s brands Louis Philippe, Van Heusen, Allen Solly, \n Peter England, People and The Collective together have retail \n space of 1.6 million sq ft in the country. “The de-merged \n entity will hold the rights to the Pantaloons format for eternity \n and the valuation takes into account the brand valuation too,” \n said the man privy to the details of the deal.<\/p>\n
“A fashion council comprising Rakesh Biyani, CEO of the \n retail business of the Future group, Kailash Bhatia, head of the \n fashion business of the group, and Pranab Barua, CEO of apparel \n and retail of the Aditya Birla group will form the council that \n will aid and advise the management of the de-merged entity,” \n he said.<\/p>\n
“Rakesh Biyani and Bhatia will continue to manage the business. \n Madura Fashion & Lifestyle brands — Louis Philippe, Van \n Heusen, Allen Solly, Peter England and People — will join the \n reach, distribution and customer loyalty enjoyed by Pantaloons \n across the country,” said a Future group press release.<\/p>\n
Kumar Mangalam Birla, chairman of the Aditya Birla group, said \n in a statement, “The proposed acquisition is in line with \n our strategic intent to be on the top of the league and to create \n the largest integrated branded fashion player in the country through \n an extension into the value segment. This acquisition will catapult \n the BSE listed Aditya Birla Nuvo to the pole position in the branded \n fashion space in all the segments with a pan India presence.”<\/p>\n
“On completion of the acquisition, the two entities, ABN’s \n Madura Fashion & Lifestyle and PRIL, will work closely as \n partners to derive operational synergies, in terms of back end, \n supply chain and many other important value drivers of the business. \n We are delighted to have Kishore Biyani as our partner in the \n Pantaloons format business. Furthermore, to ensure continuity \n the current management team will continue to run the business,” \n added Birla.<\/p>\n
PRIL said its board of directors would meet on May 3 to consider \n an issue of equity shares or instruments convertible into equity \n shares to investors on a preferential basis, subject to approval \n by an extraordinary general body meeting. <\/p>\n","protected":false},"excerpt":{"rendered":"
Meghna Maiti, Yassir A Pitalwalla, Financial Chronicle Mumbai, April 30, 2012 Kumar Mangalam Birla has done what Mukesh Ambani could not. Birla has sewn up a deal to acquire a 50.01 per cent in Pantaloons, the retail format of Pantaloon Retail India (PRIL). For this, Pantaloons will be demerged from PRIL. It is a two-stage […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-3058","post","type-post","status-publish","format-standard","hentry","category-press-quotes"],"yoast_head":"\n