Reliance Infra to take control of Pipavav Defence in Rs819-cr deal

04 Mar 2015


Anil Ambani group company Reliance Infrastructure Ltd has acquired an 18-per cent equity stake in Pipavav Defence and Offshore Engineering Co Ltd together with management control, in a deal worth Rs819 crore (approximately $132 million).

''Reliance Infrastructure, together with its wholly-owned subsidiary Reliance Defence Systems Pvt Ltd, has agreed to acquire from the promoters of Pipavav Defence 130 million equity shares representing approximately 18 per cent shareholding in the company at a price of Rs63 per share, aggregating to Rs819 crore,'' the company said in a statement.

The deal is at a 17.6-per cent discount to Pipavav Defence's closing price on Wednesday.

Reliance Infrastructure said it would subsequently make an open offer to public shareholders of the private sector shipyard, at Rs66 per share, in order to take its stake to 26 per cent.

As per the agreement, Reliance Infrastructure will also acquire from the promoters of Pipavav Defence additional equity shares of the company, at the same price of Rs63 per share, as is required to ensure that Reliance's shareholding is not less than 25.10 per cent of the target company, subject to the response to the open offer.

Post transaction, the existing promoters of Pipavav Defence will continue to retain a minority stake in the company, together with two non-executive board seats.

The acquisition is the largest in Indian defence sector and the first major buy by Reliance Infrastructure.

JM Financial Institutional Securities Ltd is the sole financial advisor and manager to the open offer. As of 30 September 2014, the total debt on the of books of Reliance Infrastructure stood at Rs23,890.89 crore.

The transaction is subject to the customary 'conditions precedent' and various statutory approvals, Reliance Infrastructure said.

''This is a unique opportunity for Reliance Group to participate in Prime Minister Narendra Modi's `Make in India' programme for the high growth defence sector,'' Anil Ambani, chairman, Reliance Group, said in a statement. ''We are confident that our strategic investment will create long term value for all stakeholders,'' Ambani added.

Nikhil Gandhi, the founder promoter and chairman of Pipavav Defence, said the company is looking forward to supporting Reliance to realise the goal of creating India's foremost defence company, with an emphasis on the `Make in India' programme.

Pipavav Defence is under a massive debt restructuring involving Rs12,000-crore loan recast, but the corporate debt restructuring (CDR) package is yet to get approvals from a few banks.

The Mahindra group, which has interests in the defence equipment business,
and the Munjals of the Hero Group were also in the fray to pick up a 51-per cent stake in Pipavav Defence.

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