Grasim to merge Aditya Birla Nuvo in a 3:10 share swap

Kumar Mangalam BirlaAditya Birla Group flagship Grasim Ltd will merge with group firm Aditya Birla Nuvo Ltd (ABNL) and, subsequently, demerge and delist the financial services business of and list it as a separate company.

The boards of directors of Grasim Industries Limited, Aditya Birla Nuvo Limited (ABNL) and Aditya Birla Financial Services Limited (ABFSL) at their respective meetings today approved the merger of ABNL into Grasim and the subsequent demerger and listing of its financial services business through a composite scheme of arrangement.

The transactions will result in the creation of one of the country's largest and well-diversified companies with a combination of cash generating and high growth businesses, Grasim stated in a release.

The merged entity will have a portfolio of manufacturing and services businesses with a leading presence across cement, financial services, telecom, textiles and chemicals, according to the release.

The moves will help the group achieve consolidation of common businesses as well as of stakes in different group companies besides unlocking value for shareholders, Grasim stated.

''The proposed restructuring will create one of India's largest, well-diversified companies with a healthy mix of businesses with steady cash flows and long-term growth opportunities,'' said Kumar Mangalam Birla, chairman, Aditya Birla Group.

''With diverse businesses spanning manufacturing and services, the combined company provides a play on India's growth story. The demerger and listing of the financial services business will unlock value for shareholders,'' he added.

The transaction, subject to regulatory approvals, entails implementation of the scheme through two steps of merger and demerger. Once ABNL is merged into Grasim, the group will proceed with demerger of its financial services business resulting in a listed financial services company with 57 per cent owned by post-merger Grasim and the balance being held by post-merger Grasim shareholders on a proportionate basis.

With an aggregate turnover of approximately Rs59,766 crore and EBITDA of approximately Rs11,961 crore for the year ended 31 March 2016, Grasim will become the No 1 cement company in India with the largest selling brand.

It will also be among the top 10 diversified private non-banking financial companies (NBFCs) in India, among top 5 of the country's private sector life insurers and asset management companies and the top telecom operator in India.

Grasim is already the leading global producer of viscose staple fibre, the largest chlor-alkali manufacturer in India and the country's top manufacturer and exporter of viscose filament yarn and among top four producer of insulators globally.

''This merger provides the shareholders of Grasim with exposure to fast growing sectors including telecom and financial services,'' Dilip Gaur, managing director of Grasim, said.

''We believe this transaction provides significant benefits to our shareholders, through direct exposure to seasoned, strong cash flow generating businesses. Further, shareholders will benefit from a larger free float and better liquidity of the combined company,'' Lalit Naik, managing director of ABNL, added.

For demerger of financial services business into ABFSL, each shareholder of Grasim (post-merger) will receive 7 equity shares in ABFSL for every 1 equity share held in Grasim, ie, a shareholder holding 100 shares in Grasim will receive 700 shares in ABFSL.

In aggregate, each shareholder of ABNL holding 100 shares will receive 30 shares in Grasim and 210 shares in ABFSL.

The Board of Grasim has also recommended sub division of its equity shares of Rs10 each into 5 equity shares of Rs2 each. The exchange ratio would be adjusted accordingly to take into account the effect of such subdivision.

The transaction is subject to the customary statutory and regulatory approvals including approvals of the respective high courts, the stock exchanges, Competition Commission of India and the respective shareholders and creditors of each of the companies. The demerger will become effective subsequent to the effectiveness of the merger. The transaction is expected to be completed by the fourth quarter of the next fiscal ending 31 March 2018.