Tube Investments of India Ltd. (TIIL), a Murugappa Group firm, has entered into a securities subscription agreement to bail out debt-ridden CG Power and Industrial Solutions Ltd.
On Friday, the board of TIIL approved the proposal for making a binding bid for acquiring controlling interest in CG Power through a combination of investment in equity shares and warrants worth ₹700 crore.
The deal, issue and allotment of equity shares and warrants are subject to TIIL being declared a successful bidder by the lenders by August 28, company shareholders and Competition Commission of India, both the companies said in filings.
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CG Power EGM
As per the proposal, on allotment of equity shares, TIIL will get a 50.62% stake in CG Power and after conversion of the warrants, the holding will increase it to 56.61%. CG Power, meanwhile, has convened an extraordinary general meeting (EGM) on September 2 for seeking shareholders’ approval for the preferential allotment of shares.
These warrants will be converted into equivalent number of equity shares at the option of TIIL within 18 months from the date of allotment. Of the total investment in warrants, 25% will be paid upfront at the time of subscription.
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TIIL operational, financial and governance capabilities will help remove the present difficulties and hardships of CG Power. Since both the companies are in the engineering business, the acquisition is expected to provide synergy. The deal is expected to be completed within 120 days, TIIL said.