Spentex Successfully Closes the Uzbekistan Buy; Emerges as India´s Largest Spinning Enterprise

Spentex Industries Ltd has announced that the Company on August 20, 2006 has successfully acquired the management control of business of Tashkent To´ytepa Tekstil, LLC, the state- controlled spinning entity in Uzbekistan with a capacity of 220,000 spindles and 236 airjet looms. This acquisition catapults the Company as India´s largest spinning enterprise with an installed capacity of over 570,000 spindles. The transaction was a part of the privatisation programme of the Republic of Uzbekistan. ICICI Securities has acted as the sole strategic advisor of the Company on the transaction.

This change of control follows a successful bidding process where the Company emerged as the winning bidder leaving behind competition from domestic, Turkish and Korean players. The key highlights of the transaction are as follows:

- The transaction comprises acquisition of two manufacturing facilities located in the cities of Tashkent and To´ytepa. These two state-of-arts plants are the largest yarn manufacturing facilities in Central Asia with a combined installed capacity of 220,000 spindles and a weaving capacity of 236 air jet looms.

- The acquisition consideration of USD 81mn would be payable over a period of 4 years.

- The transaction is the first direct investment by an Indian Company into the Republic of Uzbekistan.

- Largest foreign direct investment in textile industry in Uzbekistan in recent times.

Further the Company has informed that, the Government of Uzbekistan has agreed to give a number of incentives to the Company in lieu of its investment in Uzbekistan economy which include 15% discount on raw cotton, exemption on corporate taxes, customs duty and VAT. This transaction is shareholder value accretive and would enable the Company to emerge as a leading textiles enterprise in the next few years. The Company is funding the transaction through a combination of internal accruals, equity funding by Citigroup in the special purpose vehicle set up in Netherlands and borrowings from ICICI Bank.

Source : Equity Bulls

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