Aditya Birla Nuvo to acquire control of Pantaloon’s fashion stores

Aditya Birla Nuvo, a listed conglomerate, will acquire a controlling 50 per cent stake in Pantaloon Retail’s fashion stores operating under the brand name ‘Pantaloon’.  A V Birla group has its own retail business under Madura Garments. The combined entity would have turnover of close to Rs 4,000 crore and retail space of 3.6m sq ft, according to statements independently issued by the two groups.

Pantaloon Retail, the Kishore Biyani controlled company, will demerge the business into a separate entity called Pantaloon’s Format.  Shareholders of Pantaloon Retail will get shares of the new entity through the demerger process.

Aditya Birla Nuvo will invest Rs 800 crore as debt before the demerger and will be allotted debentures. After the demerger process is completed, these debentures would be converted into equity shares of the new company. The A V Birla Group would then make an open offer to all shareholders of the new company.  

Shares of Pantaloon Retail jumped over 9 per cent ahead of the announcement on Monday. Aditya Birla Nuvo shares traded flat. 

The Pantaloon’s Format, launched in 1997, has 65 stores in 35 cities, along with the reverse logistics chain Pantaloons Factory Outlet that has 21 stores. “These operate through a combined retail space of over 2 million square feet,” a statement from Pantaloon Retail said.

The business is expected to post a turnover of around Rs 1700 crore by the end of the financial year in June 2012, the statement adds.

For the calendar year 2011, the Madura Garments of Adita Birla Nuvo recorded revenue of Rs. 2,145 Crore with brands like Louis Philippe, Van Heusen, Allen Solly, Peter England, People and The Collective, spanning a retail space of 1.6 million square feet across the country. “Their combined strength will be of great advantage for all the stakeholders,” the A V Birla group statement said.

The transaction will be executed as indicated:

• Pantaloom Retail (PRIL) will issue debentures to Aditya Birla Nuvo ABNL worth Rs.800 Crore at mutually agreed terms, convertible in the equity shares of the resulting entity called Pantaloons Format business.
• PRIL will demerge its Pantaloons Format business through a court scheme of arrangement. PRIL will transfer the net assets of its business, its apportioned debt of Rs.800 Crore and debentures of Rs. 800 Crore to the resulting entity. After the de-merger, the debentures will be converted into equity shares of the resulting entity.
•  ABNL will make an open offer of a minimum 26% to the shareholders of the resulting entity. After the 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%. The resulting entity will become a subsidiary of ABNL.
• 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.

“The proposed acquisition is in line with our 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,” Kumarmangalam Birla, chairman, AV Birla Group said in a statement.

JM Financial acted as a sole advisor for the transaction for Pantaloon Retail.