By Kashish Tandon and Sethuraman N R
(Reuters) -India’s Adani group is exiting its consumer goods joint venture with Singapore’s Wilmar International in a $2 billion deal as it looks to bolster its infrastructure business.
The divestment marks the Indian conglomerate’s first major transaction since the U.S. indictment of its billionaire founder in November and will see Wilmar acquire the group’s 31% stake in Adani Wilmar at a per-share price not exceeding 305 rupees.
The price is a 7.2% discount to Adani Wilmar as of Monday’s close and values the portion being sold to Wilmar at $1.44 billion.
Adani will sell its remaining 13% stake in the edible oil maker in an offer for sale to comply with India’s minimum public shareholding requirements, according to a company statement. Public shareholders already own about a 12% stake in Adani Wilmar.
Adani Group has been looking to exit the Wilmar business for quite some time as it does not align with the group’s portfolio of being an infrastructure major, said Deven Choksey, managing director at DRChoksey Finserv.
The deal comes a month after U.S. authorities accused founder Gautam Adani and some top executives of being part of a scheme to pay bribes worth $265 million to secure Indian power supply contracts. The Adani group has called the charges “baseless”.
However, the indictment had major ripple effects as French oil major TotalEnergies decided to pause investments in the group, Adani Green shelved a $600 million bond issue, while credit rating agencies flagged risks to the group’s access to funding.
The proceeds from the stake sale will be used to boost its core infrastructure business, Adani said.
Adani, which is present in segments such as renewable energy, coal, airports, defense, aerospace and cement among others, has already committed investments worth billions of dollars in these areas.
The deal will be funded from internal sources and bank borrowings, Wilmar said in a separate statement, adding that it will explore opportunities to bring in “strategic investors” for Adani Wilmar, set up in 1999 and listed on Indian exchanges in 2022.
The Indian subcontinent, including Bangladesh, Sri Lanka, and Pakistan, offers “tremendous growth potential” for the agri-food businesses, Wilmar said.
Adani Wilmar, among India’s top edible oils and food companies with 24 factories in 15 Indian cities, will be given a new name after the deal.
Adani Enterprises’ shares closed nearly 8% higher after the announcement. Adani Wilmar shares, which are down about 7.4% this year, closed little changed at 328.75 rupees.
($1 = 85.5260 Indian rupees)
(Additional reporting by Nandan Mandayam and Hritam Mukherjee in Bengaluru; Editing by Janane Venkatraman, Mrigank Dhaniwala and Anil D’Silva)
