Max India, the Analjit Singh-promoted company has decided on a divestment of its 25-year-old polypropylene business in a two-stage transaction, for an enterprise value of about Rs800 crore, a move that would help it exit its non-core business.
The Delhi-based company is negotiating with at least two overseas firms in Europe and the US for its bi-axially oriented polypropylene (BOPP) film division, according to two executives familiar with the negotiations who spoke to the Economic Times. The two-stage deal under consideration involves in the first phase the divestment of majority stake, followed by sale of the residual stake later at a pre-determined price.
According to one of the executives, the transaction was expected to close sometime this quarter was likely to value the BOPP division at Rs700-800 crore.
BOPP film finds application in flexible packaging. The year ending March 2012 would see the division generate an operating profit of Rs75 crore on revenues of about Rs700 crore.
Max recently brought in Mitsui Sumitomo of Japan as a 26-per cent shareholder in its life insurance venture replacing the US-based New York Life Insurance and making a windfall gain in the process of Rs802 crore.
According to another executive, quoted by The Economic Times, who did not wish to be named, the company was planning to distribute among shareholders a substantial part of the cash, generated from the insurance and BOPP transactions, by way of a special dividend or buyback of shares. Max India would have a corpus of over Rs1,000 crore as treasury cash upon conclusion of the transactions.