On Monday, Butterfly Gandhimathi Appliances made the announcement that it would be merging with Crompton Greaves Consumer. As a result, the company’s shares fell 5% to Rs 1,200 during intraday trading. In the mean time, Crompton’s portions were up 1% at Rs 294.10 at 09:30, driving the S&P BSE Sensex up 0.22 percent.
Crompton Greaves will issue 22 fully paid-up shares worth Rs 2 each for every five fully paid-up shares worth Rs 10 each that Butterfly holds after the merger. Butterfly will be dissolved following the merger, and the transaction will take place as a single listed entity as a result.
After 12 to 14 months, the scheme is expected to be effective. Butterfly’s public shareholders will retain approximately 3% of the combined entity following the merger.
By pooling resources, the merger will enable a variety of revenue and cost synergies, achieve economies of scale, and propel growth throughout India.
The management of both businesses is of the opinion that the amalgamated entity will benefit from the pooling of diverse human capital with extensive experience, talent, and skills in order to compete in an industry that is becoming increasingly competitive.
He also stated that it would simplify the corporate structure and make capital allocation more effective.
Because Crompton Greaves owned 75% of Butterfly, analysts believe there were already business synergies.
“After the acquisition, Butterfly contributed approximately 21% of Crompton Greaves’ revenue. At the specified swap ratio, Crompton Greaves’ equity will decrease by 3%. It doesn’t seem like a big deal since Butterfly’s business is already a part of Crompton. Effect of merger on stock price,” said ICICI Securities analysts.
