CGVD.L Regulatory News (CGVD)

Crompton Greaves Board approves the demerger of Consumer Products Business intoa separate listed company October 16, 2014: The Board of Directors of Crompton Greaves Limited ("CG")has, at its meeting held today, approved a proposal to demerge its ConsumerProducts Business Division into its wholly owned subsidiary, Crompton ConsumerProducts Limited ("CCPL") with effect from April 1, 2015. Upon the scheme ofdemerger ("Scheme") becoming effective, and subject to the requisite regulatoryapprovals including those from Stock Exchanges and SEBI, shares of CCPL areproposed to be listed on the NSE and BSE . CCPL will issue 3 (three) new equityshares to CG shareholders for every 4 (four) shares they hold in CG. Oncompletion of the demerger, CG's stake will be diluted to 25% + 1 share and theremaining stake will be held by CG's shareholders. The Board of Directors ("Board") at its annual strategic review meeting on July16, 2014 had proposed to demerge its Consumer Products Business unit as aseparate listed Company. The Board had constituted a Committee of Directorsheaded by Mr. Shirish Apte (Independent Director and Chairman of CG's Audit &Risk Committee) to examine all relevant aspects of the process of demerger andlisting and make suitable recommendations to the Board. It has completed thestrategy study and concluded that demerger of Consumer Products Business fromPower and Industrials Business would be most optimal for both businesses toenable them to rapidly and more efficiently utilize their respective strengthsin their markets. Mr. Gautam Thapar, Chairman, Crompton Greaves Ltd. said "This is part ofCrompton Greaves' continuing efforts to enhance shareholders value. We have astrong vision for power, industrials and consumer products businesses. Theproposed realignment will give each business the right fillip for growth. TheConsumer Products Business is fundamentally a marketing and customer drivenenterprise. The proposed demerger provides Crompton Greaves' shareholdersdirect participation in `pure-play' Consumer Products Business and allow thebusiness sufficient flexibility to adapt to market dynamics." Laurent Demortier, CEO and Managing Director, Crompton Greaves Ltd. added "Thisis a transformational move to allow the independent entities to emerge as twoindustry leading public companies. This would provide the focus, flexibilityand independence to both entities, and allow us to address the significantmarket opportunity in both businesses more effectively. The demerger creates anenabling platform for financing growth of respective businesses and generatinglong-term value for our shareholders." Strategic Rationale: i. Crompton Greaves Ltd (CG) was established in 1937 in India; and, since then the Company has been a pioneer and has retained its leadership position in the management and application of electrical energy. CG is engaged in three distinct lines of business namely: a. Power Systems: Power Systems is the largest business of CG, which is now well and firmly established globally. It includes manufacturing and distribution of transformers, switchgear, circuit breakers, vacuum interrupters, network protection and control gear, as well as design , execution and servicing of turnkey T&D as well as sub-station projects and solutions including complete end to end renewable projects; b. Industrial Systems: Industrial Systems has a very strong market presence and market leadership position in most segments in India. It includes manufacturing and distribution of power conversion equipment such as high and low voltage rotating machines, variable speed drives, as well as railway transportation and signalling products; and c. Consumer Products: This business is largely India centric and one of the fastest growing markets in India. It includes manufacturing and distribution of fans, domestic kitchen appliances, lighting, pumps, home automation and integrated security systems. ii. Power Systems and Industrial Systems are primarily B2B (Business to Business) businesses whereas Consumer products is primarily a B2C (Business to Consumer) business. iii. The business model, customer profile, nature of risk and competition involved in the "Power and Industrial Systems Business" vis-a-vis "Consumer Products Business" are distinct, necessitating different management approach, strategic thinking and growth focus. The board believes that CG is at an inflection point. Favorable industry dynamics present compelling opportunities for focused and independent growth in each of its lines of business. iv. The electrical consumer products industry in India has been witnessing strong growth. The Consumer Products Business is a leading player in the market, and is well positioned to consolidate its leadership position through an efficient and focused management, expansion of its addressable market and with access to diversified sources of funding for aggressive growth. The Consumer Products Business, as a separate legal entity independent of Crompton Greaves Limited will facilitate the above objectives. With a view to realize the aforesaid objectives and unlock value for all stakeholders, the Board considered and approved the proposal to demerge the Consumer Products Business into a separate listed entity. Salient features of the Scheme 1. The Consumer Products Business undertaking shall be de-merged into CG's wholly owned subsidiary, CCPL. 2. Under the Scheme, CG will transfer its Consumer Products Business undertaking including related businesses, undertakings, properties, investments, intangibles, contracts (including employee contracts) and liabilities into CCPL. 3. CCPL will issue and allot to the shareholders of CG as on the record date 3 (three) fully paid up equity shares of Rs. 2 each for every 4 (four) equity shares held in CG. 4. CCPL will apply for listing its shares on the BSE and NSE. 5. Upon demerger, CG will hold 25% + 1 share in CCPL and the balance will be held directly by the shareholders of CG. CG will benefit from the growth potential of the Consumer Products Business and its ability to create additional value for shareholders as an independent company. 6. The proposed Scheme of Arrangement will be subject to the approvals of the High Court of Judicature at Mumbai. The restructuring will further be subject to various statutory approvals, including those from the shareholders, lenders and creditors of CG and CCPL. 7. Appointed date of the scheme will be 1st April 2015. Advisors to Restructuring * Axis Capital Limited and Credit Suisse Securities (India) Private Limited are acting as financial advisors to CG. Khaitan & Co are acting as legal advisors and T.P. Ostwal & Co. are acting as tax advisors to CG * Price Waterhouse & Co. LLP has issued the report on the Share Entitlement Ratio adopted under the Scheme * Axis Capital Limited provided fairness opinion on Share Entitlement Ratio to the Board of CG