In a rare merger between a publicly listed developer and a private developer, Bengaluru-based Embassy group and Indiabulls Real Estate (IBREL) on Tuesday said that the assets of Embassy are being merged with IBREL to create one of the largest real estate companies in the country.
Under the agreement, 44.9 per cent of the new entity will be owned by Embassy, 26.2 per cent by the existing public and institutional shareholders, 9.8 per cent by existing IBREL promoter group and 19.1 per cent by entities controlled by the Blackstone group and other Embassy institutional investors.
Under the agreement, IBREL’s shares are being valued at Rs 92.5 per share, a 25.7 per cent premium to Tuesday’s closing price. The proposed merger will be achieved through a cashless scheme of amalgamation.
As part of the combination, certain private equity shareholders of Indiabulls Properties, which own the Sky / Sky Forest residential assets, shall swap their shares to NAM Opco, which is a subsidiary of Embassy Group. It will eventually merge into IBREL. NAM shareholders, which is also a subsidiary of Embassy, will get 6.619 shares of IBREL for every 10 shares of NAM whilst NAM Opco shareholders will get 5.406 shares of IBREL for every 10 shares in NAM Opco.
The merged entity called Embassy Developments, which will be co-headquartered in Mumbai and Bengaluru, will have 80.8 million square feet of launched and planned assets.
In comparison, DLF, the country’s largest developer, has 32.8 million sq ft of operational rental assets and has 3.2 million sq ft of under-construction assets. It has 19 million sq ft of development potential. DLF also has 204 million sq ft of land reserves and Rs 12,300 crore of ready inventory.
“This integration provides scale to our two organisations and allows the stakeholders to capitalise 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 and founder of the Embassy group.
The merger will provide diversification to IBREL 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 crore for the combined entity, according to a regulatory filing by the two companies.
“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 partner to make IBREL a larger, stronger and more balance platform in the future,” said Sameer Gehlaut, non-executive chairman & founder of IBREL.