In yet another consolidation exercise, the USD 41 billion Aditya Birla Group today announced plans to merge Aditya Birla Nuvo with Grasim Industries to create a nearly Rs 60,000-crore diversified entity that will be among the largest in India.
As part of the plan, financial services business of the merged entity will be hived off and merged with Aditya Birla Financial Services Ltd (ABFSL), a wholly-owned arm of ABNL and will be listed subsequently.
The boards of Aditya Birla Nuvo Ltd (ABNL) and Grasim Industries today approved a composite scheme of arrangement between the two firms and ABFSL.
"The proposed restructuring will create one of India's largest, well-diversified companies with a healthy mix of business with steady cash flows and long term growth opportunities," Aditya Birla Group Chairman Kumar Mangalam Birla said.
With diverse businesses spanning manufacturing and services, the combined company provides a play on India's growth story, he added.
"The demerger and listing of financial services business will unlock value for shareholders," Birla said.
Post merger, with an aggregate turnover of Rs 59,766 crore (for the year ended March 31, 2016), Grasim will become the number one cement company with the largest selling brand, among the top 10 diversified private NBFCs in India, top four private sector life insurers and asset management companies, and number three telecom operator in the country, the Aditya Birla Group said in a statement.
The group said for merger of ABNL with Grasim, each shareholder of ABNL will get three new equity shares of Grasim for every 10 equity shares held in ABNL.
On the other hand, for demerger of financial services business into ABFSL, each shareholder of Grasim (post merger) will receive seven equity shares in ABFSL for every one equity share held in Grasim.
"Upon implementation of the merger, demerger of its financial services business resulting in listed financial services company with 57 per cent owned by post-merger Grasim and the balance being held by post merger Grasim shareholders on a proportionate basis," the Aditya Birla Group said in a statement.
The transaction is expected to be completed by the fourth quarter of this fiscal or the first quarter of 2017-18.
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The group also said Grasim's board has recommended sub-division of its equity shares of Rs 10 each into five equity shares of Rs 2 each. The exchange ratio as stated above would be adjusted accordingly to take into account the effect of such sub division.
"This merger provides the shareholders of Grasim with exposure to fast growing sectors, including telecom and financial sectors," Grasim Managing Director Dilip Gaur said.
ABNL Managing Director Lalit Naik said the transaction provides significant benefits to the company's shareholders through direct exposure to seasoned, strong cash flow generating businesses.
"Further, shareholders will benefit from a larger free float and better liquidity of the combined company," he added.
The merger scheme will be subject to requisite approvals from shareholders, creditors, high courts and regulatory authorities, ABNL and Grasim said in separate regulatory filings.
ABNL has interest in financial services (Aditya Birla Financial Services), telecom (Idea Cellular), textiles and fertilisers, along with new ventures such as payment banks and solar power through various entities.
Grasim has presence in cement, chemicals and viscose staple fibre businesses.
Last year, the Aditya Birla group had consolidated its apparel businesses into then Rs 5,290 crore entity named Aditya Birla Fashion and Retail (ABFRL).
Under the scheme, the apparel businesses of group holding company Aditya Birla Nuvo and of another group firm Madura Garments Lifestyle Retail Company Ltd (MGLRCL) were demerged into listed firm Pantaloons Fashion & Retail Ltd (PFRL), which has now been renamed as Aditya Birla Fashion and Retail.
