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5 Jun 2007 CONSOLIDATION OF FORGING OPERATIONS. Proposed amalgamation of Mahindra Stokes Holding Company Limited, Mahindra Forgings Overseas Limited

    CONSOLIDATION OF FORGING OPERATIONS

Proposed amalgamation of Mahindra Stokes Holding Company Limited, Mahindra

    Forgings Overseas Limited and Mahindra Forgings Mauritius Limited with

    Mahindra Forgings Limited

Current merger plan

    The current merger plan involves merging the three entities Mahindra Forgings

    Overseas Limited (MFOL) (which ultimately owns 100% of Jeco Holdings AG),

    Mahindra Forgings Mauritius Limited (MFML) (which ultimately owns 100% stake in

    Schoneweiss & Co. GmbH) and Mahindra Stokes Holding Company Limited (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.

Background of the entities in the proposed merger

Mahindra Forgings

    Pursuant to a Scheme of Arrangement between Mahindra Forgings Ltd. and Amforge

    Industries Ltd the Chakan unit of Amforge had been transferred to the Mahindra

    Forgings Ltd. with effect from 1st April 2005. Currently, Mahindra Forgings Ltd. has an installed capacity of 42,000 MT. It posted sales of Rs 217 cr. for FY07.

Stokes Group

    M&M through its subsidiary holds a controlling stake in Stokes Group Ltd. Stokes

    Forgings Group is the UK's largest automotive forgings group with almost 100 years of

    forging experience and has installed capacity of 37,000 MT. The Group operates from 3

    sites in the West Midlands. Stokes Group had a turnover of approx. GBP 27 mn for

    FY07. M&M further infused GBP 2 mn in the company over last year.

Jeco Holdings AG

    M&M through its subsidiaries holds a controlling stake in Jeco Holding AG, one of the

    top five forging companies in Germany in September 2006. JECO Holding AG has over

    120 years of experience is primarily focused on the Truck, Bus & Trailer market. The

    company has forging production of 100,000 tpa and revenue turnover of approx. Euro

    193 mn for FY07.

Schoneweiss & Co. GmbH

    M&M through its subsidiaries holds a controlling stake in Schoneweiss & Co. GmbH., a

    leading company in the forgings sector in Germany in December 2006. Schoneweiss

    has over 140 years of experience in the forging sector and is one of the top five axle

    beam manufacturers in the world, specializing in suspension, power train and engine

    parts. The company has forging capacity of 50,000 tpa and turnover of approx. Euro 92

    mn for FY07. Schoneweiss has three manufacturing plants.

    Page 1 of 3

Reasons for Merger

    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

    Current status of merger plan

The Board of Directors of Mahindra Forgings Ltd. met and approved on June 05, 2007

    the scheme of amalgamation Mahindra Stokes Holding Company Limited, Mahindra

    Forgings Overseas Limited and Mahindra Forgings Mauritius Limited with Mahindra

    Forgings Limited. 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.

Based on the valuation report, the recommended swap ratios are as follows

a. To the equity shareholders of MSHCL:

    20 equity shares of Rs. 10/- each fully paid up of the Company to be issued and allotted

    at par for every 103 equity shares of Rs. 10/- each fully paid up in MSHCL.

    b. To the equity shareholders of MFOL: 20 equity shares of Rs. 10/- each fully paid up of the Company to be issued and allotted

    at par for every 49 equity shares of ?1 each fully paid up in MFOL.

    c. To the equity shareholders of MFML: 20 equity shares of Rs. 10/- each fully paid up of the Company to be issued and allotted Page 2 of 3 at par for every 73 equity shares of ?1 each fully paid up in MFML.

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

Post Merger Scenario

Financials

    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.

On a Pro Forma basis the Sales and EBITDA numbers for MFL consolidated is

    estimated to be as follows

    (Rs cr.) (FY07) MFL Standalone (Pre MFL Combined #

    Merger) (Pro Forma Estimates)

    Net Sales 217 2,001

    EBITDA 24 245 # If sales & EBITDA of all the entities involved in the proposed amalgamation were to be

    added, the resulting numbers would be as disclosed above.

    Shareholding

    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.

    Appointed Date “ is 1st April 2007 as per the scheme which is subject to the requisite approval of the shareholders / creditors of the Company and transferor companies and

    other statutory authorities and subject to the sanction / confirmation by Honourable High

    Court of Judicature at Bombay and any other appropriate authority.

    Page 3 of 3

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