Shapoorji Pallonji Group has decided to sell Eureka Forbes business to the Private Equity (PE) giant, valuing business at Rs 4,400 crore.
Eureka Forbes is a 100% subsidiary of the listed group entity Forbes & Co (Forbes).
Structuring of the transaction is very interesting –
- Normally, in such transactions, the holding company (Forbes in this case) gets the money and the same is utilised for business purposes or is distributed (as special dividend) to the shareholders.
- However, here the money would go directly the the promoter group and the minority shareholders will be able to exit only through the open offer. No money is coming in the books of Forbes. Note the following –
- Forbes will demerge Eureka Forbes into a listed entity and give proportionate shares to it’s existing shareholders.
- Forbes current shareholding is – Promoters (73.85% – Shapoorji Pallonji & Co Pvt 72.56%, Forbes Campbell Finance 1.29%), Others (26.15%).
- Advent is buying 72.56% stake from Shapoorji Pallonji and would follow that with open offer to other shareholders.
I am really not sure how easy it would be to get approvals for these kind of transactions. Fact remains – control of shareholders over individual businesses is not as direct as this transaction implies. Think about the other stakeholders in the holding company e.g., bankers.
It’s also important to mention here that Forbes had a negative networth of Rs 96 crore and borrowings of Rs 804 crore as at March 31, 2021.