Madura Garments to merge with Pantaloon Fashions

Aditya Birla Group’s apparel business to form `5,290 crore entity

• The swap-ratio, ABNL shareholders will get
• 26 new equity shares of PFRL for every 5 equity shares held in ABNL, pursuant to the demerger of Madura Fashion
• MGLRCL shareholders will get 7 new equity shares of PFRL for every 500 equity shares held in MGLRCL, pursuant to the demerger of Madura Lifestyle
• Preference shareholders of MGLRCL will get 1 new equity share of PFRL
• The transaction is likely to be completed in next 6 to 9 months, subject to corporate and regulatory approvals

Mumbai: In a major restructuring exercise, Aditya Birla Group on Sunday has announced the merger of its apparel businesses into Rs 5,290-crore entity - Aditya Birla Fashion and Retail (ABFRL), which will be the largest pure play fashion lifestyle 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 (ABNL) and another group firm Madura Garments Lifestyle Retail Company Ltd (MGLRCL) would be demerged into listed firm Pantaloons Fashion & Retail Ltd (PFRL). "We are combining businesses of Madura Garments and Pantaloons from Aditya Birla Nuvo through a process of a vertical demerger and creating a listed apparel retail company.

The new company (ABFRL) will be the largest not only in the listed but also in the non-listed space," Aditya Birla Group chairman Kumar Mangalam Birla said here on Sunday. The new entity will have a retail network of 1,869 exclusive stores. According to analysts, the combined entity will have revenue of over Rs 6,000 crore.

Birla further said that the group has created a structure where shareholders of ABNL will get a direct shareholding in the apparel business through ABFRL. According to the swap-ratio recommended by two independent valuers - Price Waterhouse and Co LLP and Bansi Mehta and Co, ABNL shareholders will get 26 new equity shares of PFRL for every 5 equity shares held in ABNL, pursuant to the demerger of Madura Fashion.

MGLRCL shareholders will get 7 new equity shares of PFRL for every 500 equity shares held in MGLRCL, pursuant to the demerger of Madura Lifestyle. Preference shareholders of MGLRCL will get 1 new equity share of PFRL. The transaction, which is subject to corporate and regulatory approvals, is likely to be completed in next 6 to 9 months.

After the completion of the transaction and issuance of new shares, the existing base of 9.28 crore equity shares of PFRL will go up to 77.28 crore equity shares. A shareholder holding 100 shares in ABNL will continue to hold 100 shares in ABNL and in addition will get 520 shares of PFRL. Despite repeated queries on the deal size, Birla declined to comment on the same. ABFRL will have presence across formats in the apparel industry.

When asked whether the group will bring in more retail companies in phases in the near future, Birla said there was no plan to do so. On capital infusion, he said the new entity would not require any additional funding. "This business generates strong cash flow and I believe that it can use its own internal accruals to fuel its own growth plan. It doesn't require any funding beyond that," Birla added.