Just Heard the news that Aditya birla nuvo is being merged with Grasim and both the boards approved the merger.
The merger details are mentioned below for reference.
Each shareholder of ABNUVO will get 3 shares of Grasim for every 10 shares held.Each shareholder of Grasim(Post merger) will get 7 shares of ABFinancial services limited(Which holds Housing finance,Insurance and Asset management company AMC ).
In total if a shareholder in Aditya birla Nuvo is having 100 shares they will receive 30 shares of Grasim 210 shares of the to be listed Aditya birla Financial Services.
The merger might not be good news for minority shareholders of the
ABNUVO and
Grasim.Because the business which is having great potential is being spun out and being separately listed that is the Financial services business.The cash grizzling IDea will be a subsidiary of Grasim and it might need to fund it for expansion or for taking on Reliance JIO(This might be good for the shareholders of Grasim).
Important things to note about the merger are mentioned below for reference
- Increasing promoter share is the main reason for the merger.
The Promoter stake in Grasim is around 23 percent and in ABNUVO is 58 percent.If they merge both the promoter stake will be 40 percent that is a good place to be in for a promoter.
- New financial services company Aditya birla financial services company will have no exposure to the Debt laden and Sinking company IDEA.
- " The merger will Unlock value for the shareholders", a statement by Kumar mangalam birla chairman of Aditya birla group(I did not expect such a nasty statement from such a person he is just dumping all the waste businesses which will lot of cash into Grasim).
- Grasim Industries will hold 57 percent stake in Aditya Birla Financial services company.
- Grasim(Debt Dumping Yard for Aditya Birla Group & Holding company)
As per the records March 2016 debt of Grasim is around 9000 crores and debt of ABNUVO is around 33000 crores(worth mentioning).Already Grasim is holding 60% stake in Ultratech and now these companies are being merged into it so they are just making it a holding company.
As per my analysis the holding company is being transferred from ABNUVO to Grasim and the main reasons for doing it are the Increasing of promoters shareholding to 40 % and they wanted some place to consolidate the shareholding of idea so that when cash is required it can be raised.
Over all even good promoters like Birlas if they take minority shareholders for a ride it's time for minority shareholders to awake and reject the merger.Hope time comes when Promoters think differently and create more shareholder value like Tatas(tata group).
I never thought that Kumar mangalam birla is in same page as Vedanta chairman Anil Agarwal.(Never in my wildest of Dreams)
