Promoters of Primus Retail Pvt Ltd, that operates through the brand Weekender, are selling their flagship brand to a little known public listed finance firm Madhusudan Securities. According to the deal, Madhusudan Securities is acquiring the brand from Ascent Capital (formerly UTI Ventures)-backed apparel retail firm Primus Retail for Rs 100 crore partly through issue of shares that will give
shareholders of Primus majority stake in the listed company.
Madhusudan will issue 6.14 million fresh shares to equity holders of Primus, whose combined holding will constitute 80% of the expanded equity base. Since shareholders of Primus will own majority stake post the issue of shares, they will need to come out with an open offer to buy more shares of the company as per takeover norms.
The deal will help Primus list its brand, though it is expected to remain priovate in the short term as the deal goes through. "The move is seen as a step by the company to enable it to raise FDI, as the present FDI norms bar privately held companies to raise money via this route," said a source familiar with the development.
It is not clear how much stake Ascent Capital holds and what its exposure would be in Madhusudan Sec, post the transaction. It had reportedly invested around $8 million through more than one tranche in the company four to five years ago.
Reportedly, Citigroup Venture Capital was also in talks to pick a stake in Primus in 2007 for $8 million. It is not clear if CVCI indeed went ahead with the transaction but, as of March 2009, it did not count Primus as a portfolio firm.
Madhusudan Securities scrip rose 4.64% on Monday and was trading at Rs 64.25, just short of its intra day upward circuit limit valueing the firm at around Rs 9 crore. Issue of over 6 million shares at the current price will value the company at Rs 49 crore (~10.5 million).
Set up in late 1980s, Weekender was acquired in 2007 by Primus Retail in a deal valued at approximately Rs 95 crore. According to its website, Weekender is available in 60 exclusive stores and 40 shop-in-shops spread across 40 cities in the country. Primus Retail has plans to expand the Weekender business to 200 exclusive stores and 100 shop in shops in the next two years.
"There is also a general perception that markets value brand better. The move will certainly result in some liquidity event for Primus Retail, besides increasing its valuations as a retail company on the whole," added the source.
Primus Retail focuses on lifestyle products - sports and fashion apparel, accessories and footwear. The Bangalore-headquartered firm is also the master franchisee for some international brands such as Levi’s and Adidas.
Primus itself is a little over seven-years-old. It was set up by a Bangalore-based apparel exporter K Mohan & Co. in partnership with Indusage Advisors, a boutique corporate finance group based in India
and Singapore. Its promoters are Raju Mahtaney (chairman of K Mohan & Co), Balaji Bhat (chartered accountant) and P Sudhir Rao (founder director of Karvy Investor Services and Karvy Securities who now manages Chennai-based business advisory firm Indusage Advisors).
Madhusudan board is meeting this Wednesday to consider the preferential allotment to Primus Retail, to explore the fund raising options required for the Primus acquisition, to increase the authorised share capital and to amend the company’s business objectives to include retail.