The Birla-Pantaloon deal has encountered a hurdle as Competition Commission of India (CCI) sends back the proposal saying the deal came in premature and required nod from boards of the both the companies.
According to CCI, the parties have given the notice (for the transaction) prior to the triggering of the relevant provisions. “The commission hereby decides that the notice given by the parties is not a valid notice," CCI said in its order.
Both the parties are likely to discuss more on the intricacies of the deal which have been agreed so far through the initial MoU. After the further discussions, a fresh application to the CCI for regulatory approval will be made.
The deal was previously announced on April 30.
If the deal gets finalised, Birlas will buy a majority stake in Biyani's Pantaloon brand for Rs 800 crore through issue of optionally-fully convertible debentures (OFCDs). The Group will also take on an additional Rs 800 crore of debt into the new entity.
"It is observed that the notice for the proposed combination, which has been jointly given by the parties pursuant to the execution of the MoU itself, while awaiting the final decision of the board of the respective parties... is not in accordance with the provisions (of the Combinations Regulations)," the CCI order said.
"The MoU is not a binding agreement in view of its terms and conditions contained therein, inter-alia, such as the subscription amount of the OFCDs has been kept in the escrow account by the parties, the release of which is in itself contingent on the approval of the scheme, including the proposal of demerger and merger, by the boards,” the order further stated.
The CCI said the MoU only paves the way for an "interim arrangement" since it will terminate immediately on execution of the implementation agreement or if the scheme does not get approval by the boards.