Indiabulls Real Estate and two subsidiaries of Embassy Group have entered into a definitive agreement to merge their residential and commercial projects across markets to create one of the largest property development platforms in the country.
The combined entity will hold both the developers’ ongoing, completed but unsold and planned projects with 80.8 million sq ft of development potential. This exercise will mark Indiabulls Group’s exit from real estate business.
As an existing investor in both the companies, certain entities controlled by Blackstone Group have also submitted a non-binding letter of intent for participation in this amalgamation.
The proposed merger will be achieved through a cashless structure as Embassy subsidiaries–NAM Estates (NAM) and Embassy One Commercial Property Developments (NAM Opco)–will swap shares with Indiabulls Real Estate.
According to the terms approved by boards of both the merging entities, Indiabulls Real Estate shares are valued at Rs. 92.5 per share, a 25.7% premium to Tuesday’s closing price.
Shareholders of Embassy subsidiary NAM will get 6.619 shares of Indiabulls Real Estate for every 10 shares of NAM, while NAM Opco shareholders will get 5.406 shares of Indiabulls Real Estate for every 10 shares in NAM Opco.
“This integration provides scale to our two organizations and allows the stakeholders to capitalize on the opportunity created by the market consolidation and dislocations. The transaction also offers growth to the listed entity by combining a portfolio of well-located commercial projects across Mumbai, NCR and Bangalore, which has seen the largest absorption in office space over the past five years,” said Jitendra Virwani, Chairman, Embassy Group.
The merger is expected to be completed by the second quarter of 2021-22, the company said in its regulatory filing.
Around 44.9% stake in the resultant listed entity, on completion of the merger, will be owned by Embassy promoter entities, while 26.2% by the existing public shareholders, excluding old and new promoter groups. Around 19.1% stake will be held by the existing international private equity and institutional investors, including Blackstone, while 9.8% will be with old promoter entities.
“This merger marks the culmination of a journey I began almost 15 years ago to build a world class real estate company…I believe Embassy promoters are the right partners to make IBREL a larger, stronger and more diverse platform in the future. I look forward to working with them as we integrate these two companies,” said Sameer Gehlaut, non-executive Chairman, Indiabulls Real Estate.
Jitendra Virwani, promoter of Embassy Group, along with promoter entities of NAM will be the promoter of the combined Indiabulls Real Estate, which will be renamed as Embassy Development. Sameer Gehlaut along with existing Indiabulls Real Estate promoter group entities will initiate the process of reclassification as required.
The newly combined company with 30 projects with focus on Mumbai, Bengaluru and National Capital Region will be co-headquartered in Mumbai and Bengaluru.
The merger shall provide diversification to the company’s shareholders towards a balanced mix of residential and commercial development with visibility on near-term liquidity through sold receivables in excess of Rs. 4,220 crores for the combined entity, Indiabulls said.
The combined entity’s residential business is estimated to have surplus from launched and planned residential projects exceeding Rs 18,500 crore. It expects to realize Rs 10,667 crore of surplus from launched residential assets with Rs 201 crore net investment, while near-completion inventory is estimated to generate a net surplus of Rs 6,288 crore.
The company will have potential annual rental yield of Rs 4,241 crore on completion of planned commercial projects and has a land bank of 3,353 acres.
As part of the merger, certain private equity shareholders of Indiabulls Properties that owns the Sky and Sky Forest residential assets, shall swap their shares to NAM Opco and will eventually merge into Indiabulls Real Estate by virtue of a National Company Law Tribunal (‘NCLT’) approved scheme of arrangement, the company said.
The combined entity is expected to benefit from a complementary pan-India presence across key markets including a significant presence in the commercial and residential market of Bengaluru.
Source: Economic Times