Anil Ambani-controlled Reliance Infrastructure Ltd has pipped several other business groups including Munjals of Hero and Mahindras to ink a deal with Nikhil Gandhi-promoted SKIL to buy management control of Pipavav Defence & Offshore Engineering Co Ltd.
Although the deal involves a minority stake, the agreement calls for Reliance Infra getting sole management control of the defence equipment maker. Coupled with this it has also signed a simultaneous deal to buy more shares from SKIL to ensure it owns at least 25.1 per cent in the firm, and this has triggered an open offer.
In the first leg of the deal, Reliance Infra is buying 17.66 per cent stake of Pipavav from the Gandhi family for Rs 819 crore ($132 million). It has also inked a deal to buy additional 7.44 per cent from SKIL for Rs 345.2 crore, which would give it up to 25.1 per cent stake.
However, this would be triggered if the open offer does not manage to get any takers.
The firm has made an open offer to buy another 19.14 crore shares representing 26 per cent stake from the public shareholders at Rs 66 each, as against the deal value of Rs 63 a share with SKIL. The open offer could cost Reliance Infra as much as Rs 1,263.3 crore, which could give it as much as 43.66 per cent stake.
This means it would have to shell out anywhere between Rs 1,164.2 crore ($188 million) and Rs 2,082 crore ($335 million) to get between 25.1-43.66 per cent stake in Pipavav Defence.
SKIL as a group held around 42 per cent stake in the firm and post the first leg of the deal will see its stake shrink to a little over 24 per cent and if the additional stake sale is triggered it would end up with a little over 16 per cent stake. Currently, almost all
of the promoter stake is pledged with financial institutions.
Gandhi family will continue to hold the minority stake with two non-executive board positions.
Anil Ambani, chairman of Reliance Group, will become chairman of Pipavav Defence.
Reliance Infra said it is anticipating potential orders worth $20 billion in the defence space in the next five years.
JM Financial is the sole financial advisor and manager of the open offer.
Pipavav is a defence equipment, ship building and offshore infrastructure company. It is also the first Indian firm to get a licence and contract to make submarines for Indian Navy.
The firm has been laden with debt and was reportedly under the radar of several firms including M&M and Munjals of Hero Group. Munjals had recently sold a chunk of their shares in the flagship listed firm, reportedly, to prepare for the deal to buy stake in Pipavav.
(Edited by Joby Puthuparampil Johnson)