Mumbai, April 30: The Aditya Birla group is picking up a controlling interest in Pantaloons, the retail format stores that the Kishore Biyani group is planning to demerge from Pantaloon Retail (India) Ltd.
Aditya Birla Nuvo Ltd (ABNL) will need to stump up Rs 1,600 crore to acquire the stake in the demerged entity, which will encompass the Pantaloons brand and 2.05 million square feet of retail space.
ABNL has apparel brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, People and The Collective in its stable.
The deal will bring together two organised retail players and pare PRIL's debt by Rs 1,600 crore. Under the terms of the complex transaction, PRIL will issue debentures worth Rs 800 crore to Aditya Birla Nuvo, which will later be converted into shares of the demerged entity. The Aditya Birla group will also assume Rs 800 crore worth of debt.
PRIL will demerge its Pantaloons format business through a court scheme of arrangement, transfer the net assets of its business, its apportioned debt of Rs 800 crore and debentures of Rs 800 crore to the resulting entity.
Sources said existing shareholders of PRIL would also get shares of the demerged entity, which will be listed on the stock exchanges. ABNL will make an open offer of a minimum 26 per cent to the shareholders of the resulting entity.
After the listing of the resulting entity and on conversion of debentures into equity, ABNL will hold at least 50.01 per cent in the demerged entity, which will become its subsidiary.
Sources added that the promoter group of PRIL ' the Biyanis ' would hold around 25 per cent stake in the demerged entity. The transaction is expected to be completed within 8 to 10 months.
Interestingly, even after the completion of the acquisition, the leadership teams of both Madura Garments and Pantaloons will aid and advise the management of the demerged entity on leveraging the strengths of brands from both the stable.
"On completion of the acquisition, the two entities 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. Furthermore, to ensure continuity the current management team will continue to run the business," said Kumar Mangalam Birla, chairman of the Aditya Birla group.
The acquisition will catapult ABNL to the top position in the branded apparel segment with a pan-Indian presence.
It will not only have multiple brands but also store formats and a complete range across categories that include casual wear, ethnic wear, formal wear, party wear and sports wear for men, women and kids. Moreover, the transaction will add more retail space to the 1.6 million square feet that ABNL already has in fashion retail.
Although the announcement of the deal was made after market hours, investors had got wind of it. The PRIL share rose 9.25 per cent to Rs 187.75 on the BSE.