Tuesday, December 11, 2007

Nicco Corporation: Update (11-Dec-07)

Update (11-Dec-07):

A news release by Nicco Corporation to the BSE today stated this:

With reference to the earlier announcement dated July 30, 2007, relating to the signing of the term Sheet with Prysmian Cable Molding BV, Netherlands, Nicco Corporation Ltd (Nicco) has informed BSE that the Company has late last night entered into definitive agreements with Prysmian (Dutch) Holdings BV on the following basis:

1. Nicco and Prysmian (Dutch) Holdings BV belonging to the Prysmian group shall jointly participate in a new Company called Nicco Cables Ltd; where Prysmian (Dutch) Holdings BV shall become the majority shareholder (60%) with the Company holding 40%.

2. Prysmian Group is a world leader in the energy and telecommunications cables Industry with strong market position in higher-added value segments.

3. NICCO Cables Ltd, will acquire the Cable business from the Company pursuant to a Scheme of Arrangement and / or on slump sale basis, and shall be the Joint Venture Company. The common participation into the joint venture and the transfer of the business are subject to conditions precedent including approvals / consent of the Shareholders, lenders / CDR, Hon'ble High Court and other requisite parries / authorities as may be applicable.

- The Joint Venture will benefit from the combination of Prysmian's global knowledge and technology expertise and Nicco's business network and knowledge of local market and will be also well positioned to exploit the strong growth trends in Indian Cable market driven by substantial investments in infrastructure.

4. The main features of the contractual arrangement in relation to the Joint Venture Company are as under:

a) The Board of the Joint Venture Company shall consist of five Directors, three of them including the Managing Director to be appointed by Prysmian and two of them, including the Chairman, to be appointed by Nicco, Mr. Rajive Kaul, Chairman of Nicco shall be the Chairman of the JV Company. Prysmian will be responsible for managing the Joint Venture's operations.

b) Nicco shall receive a consideration in excess of Rs 130 crores, (subject to adjustments), for the transfer of its cables division. The transaction will also result in, inter-alia, the debt relating to the cables business getting transferred from the Company to the Joint Venture Company.

c) Nicco Corporation and Prysmian (Dutch) Holdings BV have agreed upon customary shareholder rights including board representation rights, quorum rights, affirmative rights, information rights, anti-dilution rights, share transfer restrictions such as a right of first offer, call / put option and other governance mechanisms including a deadlock resolution mechanism.


what does this mean:

- Nicco Corpn will hive off its cable biz and the debt attached to it
- Nicco Corpn will receive an additional Rs.130 crore for this stake sale
- Investors will therefore (probably) receive shares in Nicco Cables (the new entity) and will continue to hold some stake in Nicco Corpn.

- The question now is, what will the new Nicco Corpn (minus its cable biz) do?????

- And, what will the management do with Rs.130 crore that the company will receive from Prysmiam???

I had written on this stock a couple of days ago.

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