De-merger: Breaking it down

• is a corporate restructuring
• in which a business is broken into components
• either to operate on their own, to be sold or to be liquidated.
• It allows a large company, such as a conglomerate
• to split off its various brands or business units
• to invite or prevent an acquisition,
• raise capital by selling off components that are no longer part of the business's core product
line
• or to create separate legal entities to handle different operations.

• EXAMPLE: In 2001 British Telecom conducted a de-merger of its mobile phone

operations, BT Wireless, in an attempt to boost the performance of its stock.
British Telecom took this action because it was struggling under high debt
levels from the wireless venture.
Aditya Birla Group
• It is an Indian multinational conglomerate, headquartered in Mumbai, India.
• It operates in 35 countries with more than 120,000 employees worldwide
• The group was founded by Seth Shiv Narayan Birla in 1857
• The group had a revenue of approximately US$44.3 billion in year 2018
• The group has interests in sectors such
1. as viscose staple fibre,
2. metals,
3. cement (largest in India),
4. viscose filament yarn,
5. branded apparel,
6. carbonblack,
7. chemicals,
8. fertilisers,
9. insulators,
10. financial services,
11. telecom,
12. BPO and
13. IT services
Aditya Birla Nuvo-Grasim Merger
The Rationale
• will help consolidate fast-
growing businesses
• unlock value by demerging
• listing the financial services
arm
• to simplify the group
structure by removing
cross-holding
The Swap Ratio
• a shareholder will get 3
shares of Grasim for every
10 shares of AB Nuvo
• 7 shares of AB Financial
Services for every 1 share of
Grasim
Aditya Birla Nuvo-Grasim Merger
The Financials
• The merged entity had a
revenue of Rs 59,760 crore
• an operating profit of Rs
11,900 crore
• a profit after tax of Rs 2,300
crore in the year ended
March 2017
The Demerged Entity
• Aditya Birla Financial
Services will be demerged
• and listed as a separate
entity after the merger
between AB Nuvo with
Grasim.
• Its assets under
management more than
doubled to Rs 1.84 lakh
crore
Aditya Birla Nuvo-Grasim Merger-The promoters will
own 39 percent in the combined entity and public shareholders will hold the rest.
HOLDINGS: The merger is aimed at simplifying the cross-holding structure. The
combined entity will hold 28 percent in Idea Cellular, 11.4 percent in AB Fashions and
4.3 percent in Hindalco