Mahindra Forgings Ltd to consolidate forging operations of the group

Mahindra Forgings Ltd has announced the details regarding proposed amalgamation of Mahindra Stokes Holding Company Ltd, Mahindra Forgings Overseas Ltd and Mahindra Forgings Mauritius Ltd.

The current merger plan involves merging the three entities - Mahindra Forgings Overseas Ltd (MFOL) (which ultimately owns 100% of Jeco Holdings AG), Mahindra Forgings Mauritius Ltd (MFML) (which ultimately owns 100% stake in Schoneweiss & Co. GmbH) and Mahindra Stokes Holding Company Ltd (MSCHL) (which owns 99.8% of Stokes Group Ltd.) into Mahindra Forgings Ltd. After the merger, Jeco Holdings AG, Schoneweiss & Co. GmbH and Stokes Group Ltd., the operating Companies, will become close to 100% subsidiaries of Mahindra Forgings. This means that Mahindra Forgings shareholders will participate in all these entities.

The current integration is being implemented with a view to consolidate all the forging operations of the Mahindra group under one entity. As a result of this integration, Mahindra Forgings Ltd. will be the entity - A LISTED ENTITY - through which all the global forgings business of the Mahindra group will held. The advantages of the merger are listed below:

i. Consolidation of all forging businesses in one listed entity

ii. Aligns all shareholder interests

iii. Minority shareholder friendly - consolidation under listed entity - all shareholders are able to participate in the global business

iv. Best positioned to make decisions on efficient utilization of resources (i.e. manufacturing locations, product location decisions, R&D investments, etc) without any conflict of interests

v. Creating of a forging major with a consolidates sales of over Rs 2,000 cr. - Second largest forging player from India

vi. Ability to talk to global OEMs / Tier I suppliers as a significant player with multi-locational advantages

vii. Access to best in class technology from Europe for the entire forging business - leading to establishing technology leadership

viii. Synergies to be derived from dove tailing of operations, sourcing etc

The Board of Directors of Mahindra Forgings Ltd. met and approved on June 05, 2007 the scheme of amalgamation Mahindra Stokes Holding Company Ltd, Mahindra Forgings Overseas Ltd and Mahindra Forgings Mauritius Ltd with Mahindra Forgings Ltd. The board of directors also accepted the valuation report submitted by the valuers Messrs. N M Raiji & Co., Chartered Accountants and Messrs. Dalal & Shah, Chartered Accountants appointed for the purpose of recommending the share exchange ratio.

The proposed Scheme is subject to the requisite approval of the shareholders / creditors of the Company, the shareholders / creditors of the transferor Companies, other statutory authorities in the respective jurisdictions and subject to the sanction / confirmation by Honourable High Court of Judicature at Bombay and any other appropriate authority

The combined turnover of all the entities involved in the merger is estimated to be in the region of Rs 2,000 cr based on FY07 financials, making it the second largest forging player in the Indian market.

As a result and upon the coming into effect of the above described scheme of arrangement, Mahindra & Mahindra shareholding in MFL is expected to increase from current 47.1% to 60.6%. Public shareholding, accordingly, is expected to be 39.4%. The total capital of MFL is expected to increase from current ~28 mn shares to ~68 mn shares.

Source : Equity Bulls

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