To acquire a 55% stake in certain Butterfly trademarks from promoter group entities for a sum of Rs. 30.38 crore, at a price of Rs. 1,403 per equity share, Crompton Greaves signed definitive agreements with some members of the promoter group of Butterfly Gandhimathi Appliances Ltd. (“Butterfly”) in February 2022.

In order to purchase up to a 26% stake in Butterfly at a price of Rs. 1,433.9 per equity share, totaling up to Rs. 666.57 crore, and for a total consideration of up to Rs. 2,076.63 crore, Crompton made a mandatory open offer to Butterfly’s public shareholders.

The transaction is intended to further Crompton’s goal to be the leader in the small appliances segment through products, market share as well as channel synergies. And since then the company reported approval from the board in Q4 FY23 after which the company filed the scheme with stock exchanges in Q1 FY24.

The company has started regulatory processes with NCLT in Q2 FY24 which the company expects to receive in Q3 FY24. The company then plans to hold shareholders’ meeting for the matter in the same quarter. 

After the aforementioned processes, the last hurdle of NCLT approval is expected to be received in the fourth quarter of this financial year after which the company has stated the effective date of merger, process for issuing and listing of additional shares and its trading will happen in Q1 FY25.

The advisor & fairness opinion provider on the deal for Crompton is Kotak Investment Banking and SBI CAPS on the Butterfly side. Legal Advisor for the transaction is Khaitan & Co; Ernst & Young, PWC being the valuation advisors. 

In the proposed transaction, the shareholders of Butterfly will be issued 22 equity shares of Crompton for every 5 equity shares held in Butterfly, and as part of this scheme, existing shareholding of Crompton in Butterfly will get cancelled.

This means existing holders of Butterfly will hold 3% of the combined entity after the transaction is completed. Since the previous update, crompton’s market share in fans has expanded 100 bps while pumps has seen decline in 100 bps as a part of the company’s premiumization strategy. As for Butterfly, Mixer Grinder segment lost 100 bps of market share but Gas stoves gained 700 bps. 

Written by Sandeep R


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