Pantaloon & Future Ventures join to create Future Fashion

Key Objectives for the Realignment

• Future Group creates a simplified business structure with independent companies in hypermarket and supermarket chains (PRIL), fashion (Future Fashion) and food and FMCG business (FVIL).
• Achieves unlocking of value for shareholders of both PRIL and FVIL as they get shares in the fashion business in addition to shares they continue to hold of the other businesses.
• Creates financing flexibility for each of the companies by enhancing their ability to attract partners and investors and raise and deploy capital according to their business requirements.
• PRIL further deleverages with Rs 1,226 crore of debt being transferred to Future Fashion. Future Fashion will have strategic / noncore investments that may be monetised to further reduce leverage.

Transaction Steps

• PRIL and FVIL will demerge their fashion business into Future Fashion (which will be listed), subject to necessary regulatory approvals.
• The exchange ratio recommended by the valuers and approved by both the boards is 1 equity shares of Future Fashion, for every 3 equity/DVR shares held in PRIL, and 1 equity shares of Future Fashion, for every 31 equity shares held in FVIL.
• Post the realignment, shareholders of PRIL will hold 49.8% in Future Fashion, shareholders of FVIL will hold 30.5% and 19.7% will be held by PRIL as a corporate entity.
• FVIL will acquire businesses of some of its subsidiaries by way of merger and demerger and will emerge as an operating company. It will cease to be an NBFC. As a consequence of the demerger of the fashion business, it will also reorganise its share capital to change the face value of its shares from Rs 10 to Rs 6.
• The shareholding pattern of PRIL and FVIL will remain unchanged.

Key regulatory approvals

According to the merger scheme approved by both the Boards, the merger is proposed to be undertaken through a Court approved Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956. The merger will further be subject to various statutory approvals, including those from the shareholders and the lenders / creditors.

Advisors

The valuation process was jointly undertaken by Baker Tilly Singhi and Grant Thornton. KMPG and PwC acted as tax advisors to the transaction. Axis Capital and JM Financial acted as Financial Advisors to PRIL. IDFC Capital acted as Financial Advisor to FVIL. JM Financial and Axis Capital acted as Transaction Advisors.

Pantaloon Retail India Limited (PRIL)