Gokaldas Exports Ltd, India’s largest garment manufacturer and exporter, has decided to offer 70 per cent stake to the US-based private equity major Blackstone Group for Rs 676 crore (including a 20 per cent open offer). Blackstone, which has an investible capital of $68 billion, will pay Rs 275 per share to acquire 50.1 per cent stake in Gokaldas Exports from the Hindujas, the promoters. As per the SEBI rule, Blackstone will also make an open offer for another 20 per cent of the equity.
“Blackstone will pay Rs 4.75 billion to the founders of Gokaldas for a 50.1 per cent stake in the apparel firm, and, as required under Indian law, will make an open offer for another 20 per cent. Blackstone has priced its open offer at $6.65 per share of Gokaldas, about 20 per cent more than Monday’s closing price,” Managing Director Rajendra Hinduja told Indiaretailing.
Promoters of Gokaldas will hold 20 per cent of the company’s stake. “Even though we will hold 20 per cent of the stake, we will be running it as before. My brother Madanlal will be the chairman, my other brother Dinesh will be executive director, and I will continue as managing director. There will not be any change in the management,” Hinduja added. The company will have three Blackstone representatives on its board.
Before the deal, Hinduja and his family held 70.1 per cent of the firm, which went public in 2005 and counts Nike, Adidas, Gap, Reebok and Mothercare Plc among its top customers. Gokaldas has been spending around $20 million a year over the last three fiscal years expanding capacity.
“The total cost of the acquisition, including the public offer, will come to $165 million. This is one of the largest private investments in a public enterprise in the apparel sector,” said an industry expert. The Blackstone-Gokaldas deal is expected to close in three months’ time. Kotak Investment Bank was the adviser for the deal and will manage the open offer.
According to Gokaldas Exports, the acquisition will help the company become a global player in the garment sector. “Blackstone is an ideal partner for us. They have a lot of investments in the textile and retail sector globally, which will help us get more partners to work with,” Hinduja envisaged.
A part of the funds, which Blackstone will invest, is expected to be used to finance its 400-acre, Rs 2,000-crore special economic zone at Kanakapura on the outskirts of Bangalore. The project is expected to take off in the current fiscal. “We may even look at acquiring companies in emerging markets,” Hinduja declared.
Akhil Gupta, chairman and managing director, Blackstone Advisors India, said, “Gokaldas is the leading company in an industry that has seen significant growth in the Asian region, post elimination of the garment quota regime in 2005. This favourable industry dynamic combined with our highest regard for the management team of Gokaldas Exports, were key factors in our decision to enter into this partnership. We are looking forward to using our global network in contributing to the growth of the company in a meaningful way.”
Gokaldas Exports was incorporated in 1979 and has 47,000 employees in 46 manufacturing facilities, with a capacity to produce 2.5 million garments a month. Gokaldas is now looking at tapping the domestic market as the rising rupee is hitting exporters.
Gokaldas Exports’ total income in 2006-07 was Rs 1,040 crore and its net profit was Rs 70.28 crore. The company reported a net profit of Rs 10.52 crore and sales of Rs 261 crore for the quarter ended June 30, 2007.
Recently, Blackstone Group president Hamilton James said the company had a huge pipeline of deals in India and was targeting deals in the $50-to-$500 million range.
With the buyout, Blackstone has begun its Indian hunt, it seems.
– Vishnu Rageev R, Bangalore Bureau