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Home News Brokerage bullish on Crompton over Butterfly merger proposal, sees 49% upside in...

Brokerage bullish on Crompton over Butterfly merger proposal, sees 49% upside in stock


The acquisition of Butterfly Gandhimathi Appliances is most likely to benefit Crompton Greaves Consumer Electricals. Butterfly and Crompton will merge as a result of a share swap agreement between the two consumer durables companies. The financier anticipates that the arrangement should be positive for Crompton investors as the organization will better understand the advantages of the cooperative energies.

Public Butterfly shareholders will receive 22 Crompton shares for every 5 Butterfly shares they held as of the record date as part of the deal.

Butterfly’s public shareholders will retain a 3 percent stake in the combined entity following the merger’s completion.

JM Financial claims that Crompton’s shareholders will benefit from the merger because it will enable it to maximize the synergistic benefits; Additionally, the valuation multiple is superior. Crompton Butterfly’s brokerage value is 32x, while Crompton Butterfly’s is 35x.

In addition, the brokerage believes that this is a positive development, despite the fact that it occurred earlier than anticipated due to Crompton’s sale of a 6% stake in Butterfly in September of last year. The stock had decreased by 1,510 per share.

The brokerage, on the other hand, is of the opinion that it is intended for Butterfly’s minority shareholders.

According to the note that JM Financial provided, “We see this as a negative for minority shareholders of Butterfly, prima facie/alternatively, a) Share price has corrected 16% since Crompton’s OFS and significant EPS The accretion was expected to accrue in the Butterfly unit, given the sales growth and operating margin expansion (now being camouflaged in Crompton earnings), b) the earlier than expected premium related to the de-listing for CMP now disclosed swap The

“As the merger is subject to approval (expected to be completed by the end of FY24), we do not change our estimates at present” regarding Crompton, according to JM Financial. Our March 24TP remains in effect.” 435, based on the SoTP assessment.”

Disclaimer: Mint is not responsible for the opinions or suggestions expressed above, which come from individual analysts or brokerage firms. Before making any investment decisions, we recommend that investors conduct due diligence with licensed professionals.

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