Nuvoco deposits Rs 250 crore in escrow account for Emami Cement deal

The Emami group and Nuvoco had signed a deal to open the account with Kotak Bank
Taking forward its commitment to buy Emami Cement, Nuvoco Vistas has deposited Rs 250 crore in an escrow account this month as break fee.

The Emami group and Nuvoco had signed a deal to open the account with Kotak Bank.

Sources in the know said the amount was being paid to show ‘Nuvoco’s commitment’ to finalise the agreement, which it signed with Emami last month for acquisition of the cement assets.

A source said Nuvoco had already applied to the Competition Commission of India (CCI) for its clearance to take forward the acquisition plan and the deal can be closed within 2-3 months after obtaining clearance.

However, in case the deal cannot be closed the amount will be forfeited.

“The break fee was part of the agreement to prove Nuvoco’s seriousness to close this transaction”, the source said.
Emami did not comment on the development.

 

 
Last month, Kolkata-based diversified conglomerate Emami group signed a binding agreement with Nuvoco Vistas, part of the Nirma group, for divesting its 100 per cent equity stake in Emami Cement for an enterprise value of Rs 5,500 crore. Emami Cement has a debt of Rs 2,000-2,200 crore and loans against shares of Rs 1,000 crore. The net gain for Emami from the deal, therefore, will be around Rs 2,500 crore. 

The move is part of Emami’s efforts to reduce debt at the group level. However, after adjusting for Emami Cement, the promoter-level debt will be nearly Rs 600 crore.

Additionally, as part of the deal, Emami has given a pledge of 8 per cent to Nuvoco in its listed FMCG entity, Emami, against some warranties. 

Earlier, Mohan Goenka, director at Emami Group, had said that during due diligence, there were some observations based on which Nuvoco had demanded some securities from Emami to finalise the deal. 

“We had an option to reduce the money. However, we decided to give Emami shares as security. Once regulatory approvals are through, and we are confident that we will get it freed by March 2021. It could be even earlier, but the matter is sub judice”, Goenka had said.


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