Report on AB Nuvo reworking deal speculative: Pantaloon

In an interview to CNBC-TV18 Rakesh Biyani, joint managing director, Pantaloon clarified that press report of Aditya Birla Nuvo revaluing deal for buying a 50.1% controlling stake in Pantaloon is speculative in nature.

"The transaction is based on whatever we have agreed and signed as per the memorandum of understanding (MoU) in the month of May," he said. According to a media report, AB Nuvo is likely to rework the deal after Pantaloon’s June quarter earnings fell below estimates, which lead to a slight slip in valuations. Biyani added that the deal will be presented to the board of directors in the next two weeks. He is hopeful of the deal getting concluded by first week of September. Below is the edited transcript of Biyani's interview with CNBC-TV18. Q: Can you just confirm there are some talks about a possibility of the revaluation of the deal, what is your view on it? A: The press report is purely speculative. The transaction is continuing to be based on whatever we have agreed and signed as per the memorandum of understanding (MoU) in the month of May. We are in the final stages of documentation. We hope to present the entire documents to our board in the next couple of weeks. Q: By when do you think the deal is expected to be concluded and presented to the board? A: I think in the next couple of weeks. We are just in the final stages of finishing all the documents, both the parties are currently finishing off the documents. Q: Is there any talk of the cutting down of the deal value by 5-10% or so? A: The contours of the transaction were June 2012 EBITDA multiplied by 13 times and the deal was done in the month of May at an estimated June EBITDA of 200. So whatever the actual EBITDA arrived in the end of June multiplied by 13 that’s this deal and that is what it is going to be going forward. Q: Can you tell us what the reason for the delay in the deal is? There were talks of the CCI cancellations as well and the deal has not fructified up until now. A: There has been no delay beyond just one week due to additional holidays etc. The deal was always due to be concluded by the end of August. We are still hopeful that we’ll finish it off in the first week of September. Q: By when do you expect to see the CCI nod on it? A: We will be reapplying to CCI once we get the board approval. CCI has insisted that the application should only be done after the approval has received from the boards. Q: Can you give us any indication of a further deleveraging exercise that Pantaloon may undertake where the debt stands at and how much you plan to scale down debt by? A: We have already discussed this sometime back. There are no new updates as of today. Q: Last time you had also indicated that you are seeing a slowdown in the business and the media has reported that this may be one of the reasons why the valuations of the deal may be on the lower side. You had given a Rs 200 crore EBITDA guidance for the demerged entity. What is your stand on that right now and the kind of slowdown that you might continue to see from here on? A: There has been a slowdown. But we have been working very hard internally to redefine our assortments to bring back our sales. In the recently concluded August promotion of ours which is one of our big ticket promotions, we have had seen significant amount of recovery in our sales. But September is a difficult month this year because there is a shift in the festive calendar. So in true sense the customers will be back in full flow, would be known in the festive period which is starting in October this year. We have just finished off with the Onam business in Kerala, which is the first in the festive and numbers have been stronger than what we had estimated to be. Q: The deal still stands at these contours right? A: Yes absolutely, there is no change at all. Q: Post the deal AB-Nuvo will make that open offer for that minimum 26% stake? A: Yes I think they would be doing so.