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Aditya Birla Fashion to acquire PE-backed marketer of fashion labels W, Aurelia

By TEAM VCC

  • 06 May 2023
Aditya Birla Fashion to acquire PE-backed marketer of fashion labels W, Aurelia
Credit: Shah Junaid/VCCircle

Aditya Birla Fashion Retail Ltd, one of the largest fashion and apparel companies in the country, said Friday it has entered into definitive agreements to acquire TCNS Clothing, the owner of ethnic brands W, Aurelia, Wishful, Folksong and Elleven. The cash-and-stock deal values TCNS at Rs 3,105 crore ($380 million).

The deal is conditional upon Aditya Birla Fashion attaining at least a 51% stake initially as part of a two-stage transaction. It has inked a share purchase agreement with the promoters to acquire in the first stage between 14.19 million and 19.87 million shares, representing between 22% and 30.81% stake in TCNS.

Aditya Birla is also making a conditional open offer to acquire up to 18.7 million shares (29% stake) from the public, with a rider that it needs to get at least 13.02 million shares representing a 20.2% stake in the open offer.

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If Aditya Birla Fashion manages to get the minimum threshold of shares from the public, it would be able to get a 51% stake via the agreement with the promoters of the fashion company. If it gets only the minimum threshold from the public, it would mean an exit for TCNS promoters as they will need to sell their entire holding.

On the flip side, if Aditya Birla Fashion gets a 29% stake from public shareholders, it would buy 22% from the promoters to attain a majority stake. It would shell out around Rs 1,655 crore, or around $200 million, for picking up a majority stake, in one of the largest deals in the Indian fashion space.

These transactions would be followed by a cashless stock merger with the remaining shareholders of TCNS getting a stake in Aditya Birla Fashion.

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Kumar Mangalam Birla, Chairman, Aditya Birla Group, said, “By embracing TCNS's portfolio of loved women’s ethnic brands, we are reinforcing our commitment to ethnic wear, the largest category in the apparel industry. With this acquisition, the fast-growing ABFRL platform is poised for the next phase of transformational growth.”

Ashish Dikshit, Managing Director, ABFRL, said, “TCNS, through its brands W, Aurelia, Wishful, Folksong & Elleven, is catering to the Indian women’s fashion needs across markets and price points. Each of these brands have been built over a long period of time and enjoy tremendous consumer love. This transaction is a pivotal piece of our strategy of building India’s most comprehensive ethnic wear portfolio.”

Over the last five years, ABFRL has built its ethnic portfolio through a series of strategic and calibrated actions. With this acquisition ABFRL’s ethnic wear portfolio is expected to reach Rs 5,000 crore in the next three years.

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Pursuant to the above, TCNS will be amalgamated with ABFRL under the merger scheme wherein public shareholders of TCNS (as on effective date) will receive 11 shares of ABFRL for every six shares that they hold in TCNS. The transaction is subject to customary regulatory approvals including approvals from the Competition Commission of India, SEBI, stock exchanges, and National Company Law Tribunal.

TCNS counts multiple PE firms in its cap table including the lead investor TA Associates, besides Elevation Capital, ChrysCapital and public markets-focused investor Nalanda Capital.

Aditya Birla Fashion has revenue of Rs 8,136 crore and retail space of 9.2 million sq. ft. as on March 31, 2022. It is India’s first billion-dollar plus pure-play fashion powerhouse with a bouquet of fashion brands and retail formats. The company has a network of 3,468 stores across approximately 28,585 multi-brand outlets with 6,515 point of sales in department stores across India.

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It has a repertoire of India’s largest brands in Louis Philippe, Van Heusen, Allen Solly and Peter England, established over 25 years. Pantaloons is one of India’s leading fashion retailers. The company’s international brands portfolio includes - The Collective, India's largest multi-brand retailer of international brands and has long term exclusive partnerships with select brands such as Ralph Lauren, Hackett London, Ted Baker, Fred Perry, Forever 21, American Eagle and Reebok.

The company’s foray into branded ethnic wear business includes brands such as Jaypore, Tasva & Marigold Lane. The company has strategic partnerships with Designers ‘Shantanu & Nikhil’, ‘Tarun Tahiliani’, ‘Sabyasachi’ and ‘House of Masaba’.

TCNS had revenues of around Rs 1,200 crore in FY23 with nominal profits. The company had seen demand skid during the pandemic but had hit a plateau even earlier. While it has managed to claw back to go back to the same revenue level, it barely has any profit margins.

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