Bajaj Auto Board approves demerger scheme, to split into 3 companies

Bajaj Auto Ltd (BAL) has announced that the Board of Directors of the Company at its meeting held on May 17, 2007, has approved the Scheme for Demerger ("Scheme") of the businesses of the Company.

The demerger of (1) the two and three wheeler manufacturing undertaking ("Manufacturing Undertaking") and (2) its Strategic Businesses comprising the generation of wind-energy using wind-farms, the insurance business conducted through its joint ventures Bajaj Allianz Life Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd, financial products distribution business conducted through Bajaj Allianz Financial Distributors Ltd and interests in retail / consumer finance business conducted by Bajaj Auto Finance Ltd. (collectively, the "Strategic Business Undertaking") to two newly incorporated subsidiaries, Bajaj Holdings and Investment Ltd ("BHIL") and Bajaj Finserv Ltd ("BFL").

The Manufacturing Undertaking shall vest in BHIL and Strategic Business Undertaking shall vest in BFL. The demerger will be subject to all the requisite statutory, regulatory and corporate approvals, including approvals of the RBI, stock exchanges, the respective boards and shareholders.

The board has unanimously approved the proposed demerger of the undertakings of the Company as above, with effect from the closing hours of March 31, 2007, the Appointed Date.

After the demerger, each shareholder would, for every share held in the Company,

a. continue to hold one share of the Company of face value of Rs 10 each fully paid up,
b. be allotted one share of BHIL of face value of Rs 10 each fully paid up and
c. be allotted one share of BFL of face value of Rs 5 each fully paid up

As part of the restructuring, BHIL shall be renamed as "Bajaj Auto Ltd" and the existing Bajaj Auto Ltd shall be renamed as "Bajaj Holdings and Investment Ltd".

- The Scheme as cleared by the Board is subject to approvals as may be required including that of the Stock Exchanges, Bombay High Court, and shareholders of the Company.

The proposed transaction reinforces the commitment of the Bajaj Auto Ltd Group to the businesses of the new Companies BAL and BFL. The transaction structure will also enable the new Companies to tap into the cash pool of BHIL to support their future growth initiatives even while enabling BHIL to participate in the growth of the auto business and the financial services business.

The provisions of the Scheme would be applicable and come into operation from closing hours of March 31, 2007. The demerger process, which is subject to statutory and regulatory procedures, is expected to be completed by end of calendar year 2007.

JM Morgan Stanley Pvt Ltd and J Sagar & Associates are acting as Advisors for the restructuring.

Source : Equity Bulls

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