Upon merger, Crompton Greaves will issue 22 fully paid up shares of Rs 2 each for every five fully paid up shares of Rs 10 each of Butterfly. The transaction, therefore, would result in a single listed entity, and Butterfly will be dissolved post merger.
The scheme is expected to be effective post 12-14 months. Post-merger, the public shareholders of Butterfly will hold around 3 per cent stake in the combined entity.
The merger will unlock various revenue and cost synergies, achieve economies of scale by pooling the combined resources, and provide impetus to grow across all parts of India.
The management of both companies believe that the combined entity will benefit from pooling of human capital with diverse skills, talent, and vast experience to compete in an increasingly competitive industry.
Additionally, they said it will enable more efficient allocation of capital and result in simplification of the corporate structure.
Analysts believe that business synergies were already in place as Crompton Greaves had 75 per cent stake in Butterfly.
“Post acquisition, Butterfly contributes around 21 per cent to Crompton Greaves’ revenue. At the given swap ratio there will be a 3 per cent equity dilution for Crompton Greaves. Since Butterfly’s business is already a part of Crompton, we do not see a major impact of the amalgamation on the stock price,” said analysts at ICICI Securities.
First Published: Mar 27 2023 | 9:51 AM IST