Birla-Pantaloon deal faces CCI hurdle

The much touted deal between Aditya Birla group and Kishore

Biyani’s fashion apparel business Pantaloon has faced a roadblock with Competition Commission of India (CCI) sending back the proposal terming it as premature and lacking a nod from the boards of the respective companies. “The commission is of the view that the parties have given the notice (for the transaction) prior to the triggering of the relevant provisions...the commission hereby decides that the notice given by the parties is not a valid notice,” CCI said in its order.

Now both the companies involved will have to rework the proposal after looking into finer aspects of the deal that were agreed upon through an interim MoU. And after taking approval from the respective boards, a fresh application would be sent out to the CCI for regulatory approval.

“It is observed that the notice for the proposed combination, which has been jointly given by the parties pursuant to the execution of the MoU itself, while awaiting the final decision of the board of the respective parties… is not in accordance with the provisions (of the Combinations Regulations),” the CCI order said. Taking note of the filings made by the two groups, CCI said the MoU did not provide for a final arrangement. “The said MoU is not a binding agreement in view of its terms and conditions contained therein, inter-alia, such as the subscription amount of the OFCDs has been kept in the escrow account by the parties, the release of which is in itself contingent on the approval of the scheme, including the proposal of demerger and merger, by the boards.”

As per the MoU, Biyani’s Future Group was to spin off the fashion apparel format from the listed Pantaloon Retail India (PRIL) into a separate company, into which Aditya Birla Nuvo would pump in money. The transaction is expected to help Pantaloon Retail reduce its debt burden by Rs 1,600 crores.

Meanwhile both companies have refuted reports that the CCI has rejected their proposal. They have clarified that the CCI has not rejected the transaction. They have said they are committed to giving effect to the MoU and are in the process of finalising certain details of the transaction and the scheme of arrangement. Once the application is re-submitted with requisite information, the CCI will consider the proposed acquisition as per its procedures and policies.