India - Birla set to take over Pantaloon apparel biz
Dated- 01 May , 2012 - India
Kishore Biyani-led Future Group will spin off the branded apparel business under Pantaloon Retail into a separate entity in which Aditya Birla Nuvo will infuse Rs1,600 crore to acquire controlling stake, the companies announced on Monday.
As per the plan, Birla-owned Madura Garments will subscribe to some Rs800 crore of debentures issued by Pantaloon, which, on completion of the demerger process, will convert into equity in the format.
This will give Madura Garments 50.01% stake in the demerged entity and bring down promoter shareholding in it to 25%.
The deal will help Pantaloon Retail cut debt by `1,600 crore.
On completion of the demerger process, subject to necessary and statutory approvals, the demerged entity will be automatically listed at the Bombay Stock Exchange and the National Stock Exchange, Future Group said.
Pantaloon Retail, a listed entity on the National Stock Exchange and the Bombay Stock Exchange and with presence in lifestyle, value and home retailing, has been looking to shed debt and consolidate operations.
The existing shareholders of Pantaloon Retail, including its promoters, will continue to own shares in the demerged entity, the company said.
JM Financial acted as the sole financial advisor to the transaction.
Future Group's debt has spiralled to over Rs7,000 crore on a consolidated basis. While analysts said the development was unexpected, it would be a positive from Pantaloon's balance-sheet perspective. Future Group has been looking to monetise some non-core assets by sales of stakes in Future Capital Holding and Future Generali Life Insurance to get in excess of `1, 000 crore flowing in. Biyani was also looking to sell stake in non-core retail businesses like home and electronics and largely focus on food and grocery and apparel retailing.
The Pantaloons format, launched in 1997, runs 65 stores in 35 cities, along with the reverse logistics chain Pantaloons Factory Outlet that has 21 stores. The combined retail space works out to more than 2 million sq ft. The business is expected to post a turnover of around `1,700 crore by the end of the financial year (which runs July-June for the company).
In the medium term, the format is expected to add 20 stores annually.
Madura, on the other hand, owns apparel brands Louis Philippe, Van Heusen, Allen Solly, Peter England and People.
Rakesh Biyani, joint managing director, and Kailash Bhatia, CEO, Pantaloons, will continue to manage the business, while leadership teams from the two companies will form a council to advise the business, the company said.
"We are honoured to be associated with India's pre-eminent and among the most respected business houses," Kishore Biyani, founder and group CEO, Future Group said in a statement.
Future Group operates over 17 million sq ft of retail space in over 90 cities and towns and 60 rural locations through popular retail chains Pantaloons, Central, Big Bazaar, Food Bazaar, Home Town and eZone and has allied businesses in consumer finance, life and non-life insurance, logistics infrastructure and supply chain and brand development.