Warburg Pincus close to buying Pantaloon stake in FCH

Written by fe Bureau | Mumbai | Updated: May 22 2012, 07:24am hrs
US-based private equity (PE) firm Warburg Pincus is close to buying out Kishore Biyani-controlled Pantaloon Retail India's (PRIL) stake in non-banking financial company Future Capital Holdings (FCH), sources said.

Sources said Warburg Pincus is now a front-runner after PE firms Bain Capital, Kohlberg Kravis Roberts and Blackstone stepped aside, citing high valuations. Media firm Deccan Chronicle Holdings is also understood to be in the reckoning though Warburg may be willing to pay more, sources said.

As a company policy, we do not talk on deals, a Warburg Pincus company official said.

FCH has been looking for a price of R180 per share for the PRIL stake, sources said. That's a 29% premium to FCH's price on Monday, of R139.40. However, its' not clear whether Warburg Pincus will pay this price.

PRIL, which owns a 53.67% stake in FCH, is in the process of transferring the stake to a wholly-owned subsidiary Future Value Retail, which houses the Future group's value retail formats Big Bazaar, Brand Factory and KB's Fair Price.

On Friday, PRIL transferred 38.6% of its stake in FCH to Future Value Retail.

The PE firms that have backed out were not happy with the valuation since they felt it was demanding, says a senior official from a PE firm who is aware of the deal.

As at the end of September 2011, FCH had a loan funds of R3,343 crore on its books. The size of the company's balance sheet was R4,129.8 crore.

In a disclosure to stock exchanges on May 14, 2012, FCH had said its parent company PRIL will transfer its 53.67% stake in the company to Future Value Retail. The proposed transfer will be completed within 90 days starting May 18, 2012. Around 34 million shares would be transferred by Pantaloon Retail India to Future Value Retail at a weighted average market price of R133.89 per share, PRILs BSE filing noted.

Two weeks ago, the debt-laden PRIL had sold its flagship fashion business Pantaloons Format to the Kumar Mangalam Birla-controlled Aditya Birla Nuvo for R800 crore to pare its debt by R1,600 crore. PRIL had a consolidated debt of R7,800 crore on its books as on December 2011, while its core retail debt is pegged at R5,500 crore.