Investors and a lender of Subhiksha Trading Services have objected to the cash strapped retailer’s merger plan with Blue Green Constructions and Investments.
ICICI Venture, PremjiInvest and one of the lender have filed objection to the merger of the Chennai-based discount retailer with the same city-based company. These investors had earlier agreed to the merger, Subhiksha founder and Managing Director R Subramanian said. ICICI Venture owns 23 per cent stake in Subhiksha while PremjiInvest owns 10 per cent stake in the troubled retailer, which it bought from ICICI Venture.
"We understand that based on requests from some banks to hold the merger in abeyance till the corporate debt restructuring (CDR) process is completed some stakeholders who have earlier approved the merger have filed in objections,’’ he said without giving details of when the objections were raised. "The legality of their objections at this stage after having agreed to the merger will have to be reviewed and decided by the court during its hearings."
Subhiksha, in June announced the acquisition of 40 per cent stake in Blue Green Construction for Rs 2 crore with an objective to merge the acquired company with itself and rename the merged entity as Subhiksha and list on Bombay Stock Exchange and National Stock Exchange.
The paid up capital Blue Green Constructions and Investments is Rs 5 crore and the deal was closed without any premium paid to the seller.
Subhiksha said it had obtained approvals including written consent from PremjiInvest and ICICI Venture for the merger and the proposal was approved unanimously at the shareholder meeting of 31st October 2008. PremjiInvest officials weren’t immediately available for comment, while ICICI Venture spokesperson declined comment.
The merger is pending approval with the Madras High Court to enable all interested parties to file objections if any to the merger. There have been a few objections from a few unsecured creditors, which Subramanian claimed are being handled in due course by his lawyers.
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Lenders, who have taken up Subkhiksha’s account for corporate debt restructuring, had requested the retailer to hold the merger in abeyance till the CDR process is completed.
Subhiksha at a lenders meeting convened today to discuss the issue of CDR and restarting the operations of the retailer, several lenders were of the view that "stopping the merger may not be in the best interest of the company." The merger has no bearing on the completion of the CDR, he said.
"We are presently not targeting any Equity raising the merger process is not in the critical path for revival/restart of the company. The merger was more relevant for funding in the context of the pre September markets when Equity was still a option," Subramanian said.