In a move aimed at creating the country’s largest pure play fashion company, the Aditya Birla Group on Sunday announced the merger of all its branded apparel businesses into a single entity, Aditya Birla Fashion and Retail (ABFR), through an all share deal. This combined entity would be the product of the merger of Madura Garments, Aditya Birla Nuvo with Pantaloons Fashion and Retail.
The new entity would have a combined turnover of R5,290 crore and a retail network of 1,869 exclusive stores, becoming the largest pure play fashion company in the country.
Under the scheme of arrangement approved by the boards of respective companies, the apparel businesses of group holding company Aditya Birla Nuvo and of another group firm Madura Garments Lifestyle Retail would be demerged into the listed firm Pantaloons Fashion and Retail (PFRL).
Subsequently, PFRL would be renamed Aditya Birla Fashion and Retail, which would help the group capitalise on its large presence in the branded fashion market.
The merger is expected to take three months to complete. After the transaction, ABNL will hold 9.06% of the new entity, while the Aditya Birla Group (ABG) will hold 51.1%, and the public holding will stand at 39.84%.
Group chairman Kumar Mangalam Birla said the merger was aimed at creating the country’s largest brand of apparel in size and scale that unlocks value for shareholders through a composite scheme of arrangement.
Kumar Mangalam Birla, chairman, Aditya Birla Group, said that the merger is aimed at creating the country’s largest brand of apparels in size and scale that unlocks value for shareholders through a composite scheme of arrangement. “This consolidation will create India’s largest pure play fashion and lifestyle company with a strong bouquet of leading fashion brands and retail formats, “ he added.
Birla said that the management structure remains pretty much the same except that they will have a new CFO. Other than that, both the CEOs of Madura and Pantaloons will remain the same. The merged entity, which would have 1,869 stores plans to add 250-300 Madura outlets and 35-40 Pantaloons outlets every year.
As per the merger scheme, the shareholders of ABNL will get 26 new equity shares of Pantaloons Fashion Retail for every 5 equity shares held in ABNL. While the shareholders of Madura Garment Lifestyle Retail will get 7 new equity shares of Pantaloons Fashion Retail for every 500 equity shares held in Madura Garments Lifestyle Retail and preference shareholders of Madura Garments Lifestyle Retail Company will get 1 new equity share of Pantaloons Fashion Retail.
“On the completion of the transaction and issuance of new shares, the existing base of 9.28 crore equity shares of Pantaloons Fashion Retail will go up to 77.28 crore equity shares. The new shares will be issued directly to the respective shareholders of the transferor companies. An existing shareholder holding 100 equity shares in ABNL will continue to hold 100 equity shares of ABNL and in addition, will get 520 equity shares of Pantaloons Fashion Retail,” the company said in a press release.
Sushil Agarwal, CFO of ABNL, said that the merged entity will have synergies and scale benefits in terms of real estate, manpower and raw material sourcing. He added that though the merged entity will have a combined debt of around Rs 1,800 crore (including Rs 473 crore of Pantaloons), this will not stretch its balance sheet as the cash flows and Ebitda earnings of the company is strong.
Aditya Birla Fashion and Retail turnover and Ebitda stands at Rs 5,290 crore and Rs 493 crore respectively for twelve months ended 31 December. In the last five years Madura Garments Lifestyle Retail Company’s revenue grew at a CAGR of 27% to Rs 3,226 crore in FY14 while Ebitda grew at 42% to Rs 388 crore in the same period. Till the December quarter of last year’s fiscal, the company’s revenue stood at Rs 2,751 crore while Ebitda stood at Rs 325 crore.
Till the December quarter last fiscal, Pantaloons Fashion Retail Revenue stood at Rs 1,390 crore while in FY14 revenues stood at Rs 1,661 crore. While Ebitda stood at Rs 58 crore in the first nine months of FY15 compared while in FY14 it stood at Rs 35 crore.
On Friday, Aditya Birla Nuvo shares had ended at Rs 1,570.30, down Rs 8.05 or 0.51% on the BSE while Pantaloons Fashion had declined by Rs 0.80 or 0.70% to Rs 113.90. The market capitalization for ABNL stood at Rs 20,435 crore and for Pantaloons it stood at Rs 1,057 crore. The company did not reveal the valuations for the unlisted Madura Garments.
Since the acquisition of Pantaloons Fashion Retail in 2012, the company has launched 39 new stores and renovated 40 stores. The company also created 7 new brands and added 15 external brands and also increased share of private brands to 60% from 47%.
The apparels category is the largest contributor to the organised retailing market in India which is expected to grow at a robust CAGR of 18% over next few years, the release said.