Ballarpur Industries mulls restructuring, stock-split and buy-back

Ballarpur Industries Ltd has announced that the Board of Directors of the Company at its meeting held on July 24, 2007, inter alia, has take the following decisions :

1. Pursuant to the appointment of the committee of directors on the July 04, 2007 Board meeting, the Board, on July 24, 2007 has received the final recommended proposal. Three reputed firms in the field of taxation, valuation and legal aspects were consulted for examining proposals for growth options of the Company.

2. The Board accepted the recommendation based on advice received. A scheme of arrangement and reorganisation ("Scheme") under section 391-394 of the Companies Act, 1956, would be undertaken for a slump exchange: of its units at Bhigwan, Ballarpur and Kamlapuram, on a going-concern basis.

3. The Board of Directors took on record the valuation report of PriceWaterhouseCoopers ("PWC") for valuation of the three undertakings, for the purposes of the slump exchange to the company's wholly owned subsidiary known as BILT Graphic Paper Products Ltd ("BGPPL" or "Transferee Company"). The Board decided upon the slump exchange for its three undertakings as mentioned above, at a lump sum value of Rs 1950 crores based upon the range provided by PWC.

4. Upon the Scheme becoming effective, the Transferee Company will issue equity shares for a sum of Rs 450 cross and Secured Non-convertible Redeemable Debentures for Rs 1500 crores, to the Company.

5. The Company has two other unlisted subsidiaries incorporated in Netherlands, namely Ballarpur International Holdings B.V. and Ballarpur Paper Holdings B.V. ("BPH"). BPH holds the 97.8% shareholding of Sabah Forest Industries Sdn Bhd ("Sabah"), the largest integrated paper and pulp manufacturing company in Malaysia.

6. For the reorganisation of the capital of the Company, the Scheme will also provide for a stock split and a simultaneous buyback of 40% of the paid up capital of the Company. In addition, small shareholders holding 1000 equity shares or less, of the Company, prior to the stock split under the scheme, shall have the option to sell the shares in entirety.

7. The Board of Directors considered the proposal of such a reorganisation to be in the interest of the Company and its shareholders as it will result in the retirement of debts owed to secured and unsecured creditors, improve the Company's ratings and facilitate payments for buyback of shares as detailed in point no. 6 above.

8. Under the scheme, it is proposed that the Appointed Date be fixed as July 01, 2007. The Record Date for determining the shareholders of the Company as on a particular date is referenced to 30 days from the Effective Date of the Scheme. Within 45 days from the Effective Date, the Company shall undertake the stock split. A single share of the Company shall be split into 5 shares of the face value of Rs 2/- each. The non-split share has been valued at Rs 125/- which is higher than the closing price of the shares of the Company on July 23, 2007. The 6 - months - average market price of equity shares and the 2 - weeks - average market price of equity shares from the Board meeting were Rs 114.33/- and Rs 118.61/- respectively on the National Stock Exchange of India Ltd. The buy back price for the share of the face value of Rs 2/- for purchasing 40% of the paid up capital to be bought has been fixed at Rs 25/- per share.

9. Simultaneous with the stock split, 40% of the post-split stock from the paid up capital of the Company, shall be subject to a buy back by the Company in accordance with the approved Scheme. Two shares of the face value of Rs 2/-, shall be bought back by the Company for the purchase price of Rs 50/-.

10. Both the stock split and the buyback shall be undertaken, only if the Scheme is approved and sanctioned by the High Court.

11. During the meeting, the Board noted that BPH has received indicative proposals for debt and equity financing from international banks and institutions / international branches of national banks. BPH will have adequate funds to buy the investments of the Company in the equity shares of BGPPL and the debentures of BGPPL issued pursuant to the Scheme becoming effective. BPH will buy these securities for Rs 1950 crores.

12. The valuation for the buyback of 40% of the split stock is universally applicable to every shareholder of the Company. All shareholders will be required to sell 40% of their holdings as detailed in point no. 6 above. This buyback of shares is being implemented pursuant to the Scheme and the Company intends to appoint a reputed Category - 1 Merchant Banker and other advisors to monitor the buyback of shares after the Scheme is approved and becomes effective. In the absence of an Effective Scheme, no buyback will be implemented.

13. The Company intends to cause the Stock Exchange(s) to freeze the trading of its shares after the Record Date and till the date of issue of the split stocks and the buyback of equity shares of the face value of Rs 2/- as above in accordance with the Scheme.

14. The proportionate shareholding of all shareholders, even after the buyback is implemented, shall remain the same as of the Record Date, save and except in relation to small shareholders who exercise their option of tendering their entire holding up to a maximum of 1000 equity shares (pre-split) or 5000 equity shares (post-split). As a goodwill measure and in the interest of the those small shareholders (holding upto 1000 shares pre-split / 5000 shares post split) who opt to offer the entirety of their shareholding, the residual 60% of the shareholding will be bought back at Rs 30/- per share of the face value of Rs 2/-.

15. The Company will continue to hold substantial interests as a holding company in the Transferee Company as also in BPH, even after the Scheme becomes effective and the steps indicated above are implemented. The accounts of BPH and the Transferee Company shall be consolidated with the accounts of the Company, even after the Scheme is effective and the stock split and buyback are implemented.

16. The Company intends to file the Scheme, as finalised with its advisors, shortly, with the Stock Exchange. This intimation is being issued pursuant to the Listing Agreement.

Source : Equity Bulls

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