Pioneer Distilleries down 5% after fixing swap ratio for merger with USL

10 equity shares of Rs 2 each of USL, will be issued for every 47 equity shares of Rs 10 each held by shareholders of the Pioneer Distilleries.

Shares of Pioneer Distilleries were locked in 5 per cent lower circuit at Rs 130.70 on the BSE on Tuesday after the board fixed swap ratio of 1:4.7 for the proposed merger with parent company United Spirits (USL). The stock slumped 10 per cent from its intra-day high of Rs 144 touched in early morning trade.

“10 equity shares of Rs 2 each of USL, to be issued for every 47 equity shares of Rs 10 each held by shareholders of the Company, in the ratio of 1:4.7 to the shareholders of the Company, as on the record date fixed for this purpose,” Pioneer Distilleries said in a regulatory filing.

Till 11:15 am, a combined 92,200 equity shares had changed hands. There were pending sell orders for 52,918 shares on the BSE and NSE.

Shares of USL were down 1 per cent at Rs 599, after hitting a high of Rs 610 in intra-day trade on the BSE. In comparison, the S&P BSE Sensex was down 0.36 per cent at 40,657 points.

Diageo-controlled USL said, after market hours on Monday, that it has received the board's approval to merge its listed subsidiary Pioneer Distilleries into the company. The shareholding of USL in the Pioneer Distilleries shall be cancelled upon the scheme coming into force.

Pioneer Distilleries has been incurring losses in the recent past and its entire net worth has eroded. The negative net worth of the Company as on March 31, 2019 is Rs 41.63 crore. USL, holding 75 per cent of the equity capital of the Company has to account to the extent of 75 per cent of the losses of the Company while consolidating its accounts.

“Continuity of the Company without the active support of USL would be very difficult. Amalgamation of the Company with USL would be beneficial to both the companies, including with respect to ease of getting uninterrupted financial and technical support and USL getting the full benefit of the Company's manufacturing facilities”, it said.