Aditya Birla Nuvo to merge with Grasim

In a move aimed at unlocking shareholder value in the Aditya Birla group, Aditya Birla Nuvo (ABNL) has decided to merge into Grasim paving the way for the demerger and listing of its financial services business.

The transaction, subject to regulatory approvals, entails implementation of the scheme through two steps including merger of ABNL into Grasim and upon implementation of the merger, demerger of its financial services business resulting in a financial services company with 57% owned by post-merger Grasim and the balance being held by post-merger Grasim shareholders on a proportionate basis, the two companies said in a joint release.

Grasim is a $ 5.6-billion conglomerate comprising businesses in cement, chemicals and viscose staple fibre. It is a leading global player in viscose staple fibre and is the largest manufacturer of chlor-alkali and epoxy resins in India.

Its subsidiary UltraTech is the largest manufacturer of cement in India with a capacity of 69.3 MTPA and offers a complete range of building products.

As far as ABNL is concerned, it is a $3.6-billion conglomerate with leadership position across its businesses. Its financial services business ranks among the top five fund managers in India. Its telecom venture, Idea Cellular, ranks among the top three cellular operators in India. It is a leading player in linen, agri, rayon and insulators businesses.
As per the agreement, for merger of ABNL with Grasim, each shareholder of ABNL will get three new shares of Grasim for every 10 shares held in ABNL (3:10).

For demerger of financial services business into ABFSL, each shareholder of Grasim (post merger) will receive seven shares in ABFSL for every one share held in Grasim (7:1). In aggregatem each shareholder of ABNL holding 100 shares will receive 30 shares in Grasim and 210 shares in ABFSL.

With the merger, Grasim will have an aggregate turnover of approximately Rs 59,766 crore for the year ended March 31, 2016 and becomes the number one cement company in India, among the top 10 diversified private non banking finance companies (NBFCs) in India.

Grasim also becomes the top four private sector life insurers and asset management companies in India besides becoming the number three telecom operator in India.
 
“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. 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,” Aditya Birla group chairman Kumar Mangalam Birla 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,” ABNL managing director Lalit Naik said.