A V Birla group has concluded the deal with Coats Viyella
plc of the UK at Rs 236.23 crore. With that, from 1 January
2000, Indian Rayon will own the rights to six Coats
Viyella brands -- Louis Philippe, Van Heusen, Allen Solly,
Byford, Peter England and San Frisco.()
The deal has
been structured in such a way that Indian Rayon will acquire
Madura Garments as a going concern with all employees,
brand licences, and distribution and manufacturing networks
for Rs 189.23 crore, along with the brand rights for India.
in a separate transaction, Aditya Vikram Birla Trading
House, an overseas company of the Aditya Birla group,
has bought the exclusive brand rights for the South Asian
and the Middle East countries from Coats Viyella for $10.8
million (Rs 47 crore).
Says Kumar Mangalam Birla, chairman of the Aditya Birla
group, "We believe the acquisition of Madura Garments
will greatly enhance value for Indian Rayon shareholders.
The apparels business has been identified as one in which
in which we wanted to have a leadership position through
a focused entry into the high-value, ready-to-wear segment.
This acquisition as well as the acquisition of certain
overseas brand rights has catapulted the group to the
top of the league in the branded apparels market."
will probably finance this acquisition mainly through
its current cash surplus and internal accruals. But, according
to Adesh Gupta, the company's chief financial officer,
"In view of the growth opportunities and current
low interest rate scenario, the company may consider raising
market borrowings to augment internal resources."
All of Madura
Garments' employees, except its president George Zacharias,
will be transferred, with the business, to Indian Rayon.
They have been assured continuity of service on existing
terms and conditions. Zacharias is moving on to a London-based
responsibility with Coats Viyella.()
group executive president, fabrics and apparel business,
at Indian Rayon, will manage the operations of Madura
Garments for the time being, till a president is selected
either from Indian Rayon or from outside. Mr Rao was,
at one time, president of Madura Coats apparel fabrics
division. He says that the acquired division will continue
to operate under the name of Madura Garments and will
continue to enjoy a great degree of operational freedom.
will become a division of Indian Rayon, which already
has a Rs 300-crore textile business that includes Indias
only linen brand, Jayshree Linen. Madura Garments has
had sales of about Rs 250 crore in 1999, and has recorded
sales growth of 40 per cent for the last five years. It
has a national distribution network that includes 100
exclusive showrooms and 3,000 retail outlets.
For the Kumar Mangalam Birla-led Rs 20,000-crore Aditya
Birla group, this deal marks a dramatic change in image.
It will bring in instantly recognisable top-of-the-line
brands into a group whose focus has till now been on commodities.
labels, Allen Solly, Louis Philippe, and Van Heusen together
claim a 40 per cent share of the premium branded menswear
market. The Peter England shirt brand, launched in 1997,
has been an instant success and is said to be the countrys
largest selling mid-priced shirt brand today.
For the Aditya
Birla group, these acquisitions make eminent sense. One
of the big players in the textile business, it has, so
far, not been able to make an impact in the branded segment
of the premium menswear market. Its own Wall Street brand
is not in the premium segment. Branded garments have been
an important part of the growth plans. But the group didn't
have any significant presence in this market. Building
its own brands would have taken a considerable amount
of time as well as money. Hence a brand acquisition was
the obvious answer.
this is the fifth acquisition by the Aditya Birla group
in the last two years. Indian Rayon has also gone through
a major restructuring exercise in recent times. Its cement
division was transferred to group flagship, Grasim Industries.
also see : Why
Madura Coats sold garments?
here for brand details
here to see A V Birla group product portfolio