Key Highlights of the Proposed Transaction:
- Merger of Sapphire Foods India Limited (SFIL) with and into Devyani International Limited (DIL) through a share-swap mechanism.
- Swap Ratio: 177 equity shares of DIL to be issued for every 100 equity share of SFIL.
- This is similar to their current respective valuations and there is no real arbitrage opportunity
- Promoters currently hold 26.06% of SFIL. DIL’s group company will acquire approximately 18.5% from SFIL’s promoters.
- The merger is expected to take around 12-15 months for all requisite approvals.
- full integration of the two entities, along with the realization of the identified synergy benefits is expected to take additional 15-18 months after that.
In parallel, to ensure a clear and fair run in India, DIL has also agreed on the following with Yum Brands –
- Certain waivers for Pizza Hut and KFC brands;
- Acquisition of 19 KFC restaurants currently operated by Yum! India in Hyderabad; and
- a one-time payment to Yum! India towards merger approval and the license fee for the additional territory.
Consolidation of Yum in India was logical. Both outfits have been independently struggling and not able to create what everyone thought for long.
Trying out consolidation is best possible way for Yum to really assess the potential in the Indian market.
However, full impact assessment is still almost 2.5-3 yrs away and hence don’t try to read too much into the transaction at this stage.