WMG to become minority stakeholder in its own engineering division upon merger with EMC

The Williamson Magor Group (WMG) is in the process of merging its engineering companies with EMC to create a single entity in which it will have a minority stake.

According to a senior company official's estimates, the WMG, which owns 57.09 per cent in Kilburn Engineering (KEL) and another 52.33 per cent in McNally Bharat Engineering (MBEL) will be left with just over 25 per cent shareholding in the merged entity.

WMG, which has varied interests in FMCG, appliances, tea and other segments under different companies will have voting rights.

Simutaneously the Manoj Toshniwal family, which owns a 28.24 per cent stake in MBEL will become the largest shareholder of the new engineering entity accounting for an estimated 32-40 per cent stake.

EMC, an engineering, procurement and construction company operating mainly in the field of energy had bought shares in MBEL worth Rs. 50 crore in March last year which was subsequently extended in July 2015 giving the firm a sizeable control over MBEL.

Besides, EMC, which is controlled by Toshniwal will be merged with the different WMG engineering entities.

Another entity - McNally Sayaji Engineering - an over 75 per cent subsidiary of MBEL will also get merged.

"The promoters --WMG and Toshniwal family -- of the merged entity will have a 60-65 per cent control while the rest of the shares will be traded on the stock exchange. Under the scheme of amalgamation, WMG's engineering division as well as EMC will merge to become a single entity as Kilburn Engineering Ltd",a senior official in WMG said.

According to Amritanshu Khaitan, one of the director's of WMG, this move will result in KEL having revenues over Rs. 7,000 crore and an order book exceeding Rs. 10,000 crore which will make this entity one of the largest engineering firms in east India.

The scheme, according to WMG officials will facilitate debt consolidation as its serviceability will improve through more cash flows.

During April-December 2015, KEL's finance costs stood at Rs. 4.72 crore - up by 15 per cent while MBEL's finance costs shot up by nearly 56 per cent to touch Rs. 236.55 crore.

While KEL has remained cash positive clocking Rs 4 crore as net profit for the aforesaid period, MBEL was on a decline by over 304 per cent as its net losses mounted to Rs. 224.60 crore from the former Rs. 55.48 crore calling in for some drastic measures.

"It makes more sense to have a single entity rather than have different entities in the same segment", Khiatan added.

As per the scheme of the merger, Toshniwal will be getting 235 shares of KEL for every 100 shares held by them while the equity share exchange ratio for MBEL will be 100 for 120 shares of Rs 10 each. The McNally Sayaji Engineering stakeholders will also get 293 shares of KEL for every 100 shares held.

The shareholders of MBEL will get one 11.50 per cent non-convertible preference share of Rs. 100 each from KEL for one similar instrument.

This scheme of merger is currently under process.