New Delhi: India's largest retail chain Future Group Monday announced to spin off its branded apparel business from Pantaloon Retail India Ltd (PRIL) into a separate entity, and sell a majority stake in the resultant company to Aditya Birla Nuvo Ltd (ABNL) for Rs 8 billion.
"The board of Director of ABNL and PRIL has in-principally approved the proposed transaction and it is subject to the finalization of the scheme of arrangement, due diligence and statutory and other approvals," Pantaloon Retail said in a statement.
Aditya Birla Nuvo will subscribe to debentures worth Rs 8 billion issued by Pantaloon Retail in the new entity. Post the demerger, these debentures will convert into equity.
"PRIL will transfer the net assets of the business, its apportioned debt of Rs 800 crore (Rs 8 billion) and debentures of Rs 800 crore (Rs 8 billion) to the resulting entity," Pantaloon said.
The deal will help Pantaloon Retail cut its debt by Rs 16 billion, the statement added.
"We always had a great admiration and respect for the businesses developed by Madura Garments. This marks a unique coming together of brands and enterprise that will create significant value for customers, suppliers and all stakeholders," Kishore Biyani, founder and Group Chief Executive Officer of the Future Group, said in the statement.
The demerged entity will get listed on the National Stock Exchange and the Bombay Stock Exchange automatically, post demerger.
Rakesh Biyani and Kailash Bhatia will continue to hold equity shares in the new entity.
"On completion of the acquisition, the two entities 'ABNL's Madura Fashion and Lifestyle and PRIL will work closely as partners to derive synergies, in terms of back end, supply chain and many other important value drivers of the business," Aditya Birla said in a separate statement.
Aditya Birla Nuvo, which owns several branded apparel brands such as Louise Phillippe and Allen Solly, expects the transaction to be completed in 8-10 months.
After the listing of the resulting entity, Aditya Birla Nuvo will make an open offer of at least 26% to shareholders of the new entity, and will end up with just over 50% of the Pantaloon chain after the deal, it said.
JM Financial was the sole financial advisor to the transaction.
Pantaloon Retail, controlled by Kishore Biyani, runs other businesses such as hypermarkets under the Big Bazaar brand, the E-zone electronics chain and lifestyle retailer Central.
Pantaloons format has 65 outlets in 35 cities along with reverse logistics chain Pantaloons Factory Outlet that has 21 stores. These operate through a combined retail space of over 2 million square feet.