Shareholders of Aditya Birla Group firms Grasim Industries Ltd and Aditya Birla Nuvo Ltd have approved a planned merger between the two firms in the past week, paving the way for the creation of a $9.2 billion manufacturing and service business, the two companies said in a joint statement on Tuesday.
The merger follows the demerger and listing of the group’s financial services business Aditya Birla Financial Services Ltd, which is currently under Aditya Birla Nuvo. The merged entity will be in leadership position in the cement, financial services, telecom, textiles and chemicals sectors, the statement said.
More than 80% of Aditya Birla Nuvo’s minority shareholders voted in favour of the merger with Grasim in a 10 April meeting. Last week, over 90% of minority shareholders in Grasim Industries had also voted in favour of the merger.
Apart from these flagship businesses, the $41 billion conglomerate led by Kumar Mangalam Birla also has interests in copper, viscose staple fibre and carbon black. Aditya Birla Nuvo has revenue of $3.6 billion while Grasim Industries has revenue of $5.6 billion as of the year ended 31 March.
The group had announced plans to merge the two flagship companies in August in an attempt to create a stronger entity, and unlock shareholder value by spinning off and listing Nuvo’s subsidiary, Aditya Birla Financial Services.
The merged entity will lead shareholder value by bringing together the “strong balance sheet of Grasim Industries” and the “high growth potential” of Aditya Birla Nuvo’s businesses, chairman Birla said in a statement.
“With all major approvals in place, the scheme is subject to final approval from the National Company Law Tribunal (NCLT) and the BSE and the NSE. The scheme is expected to be effective during the second quarter of the current financial year,” the joint statement said.
The deal increases the Birla family’s holding in the merged entity to 39% from 31%, Bloomberg reported on 7 April citing a company presentation. While the Birlas hold their stakes in the group companies through a clutch of investment and holding companies, the larger group companies such as Grasim, Hindalco Industries Ltd and Aditya Birla Nuvo also hold stakes in each other and in other group companies.
The merged entity, Grasim, will have consolidated revenue of Rs59,766 crore, Ebitda (earnings before interest, tax, depreciation and amortization) of Rs11,961 crore and net profit of Rs4,245 crore for the year ended 31 March 2016, the statement said.
