In a major reorganisation at Crompton Greaves Ltd. (CG), its parent Avantha Holdings Ltd. has decided to exit CG’s consumer products business and sell its 34.37 per cent stake to American private equity major Advent International Corporation and a subsidiary of Singapore’s Temasek Holdings for Rs.2,000 crore.
A share purchase agreement has been signed to this effect.
While Advent will lead this acquisition, Temasek will be an independent co-investor.
The consumer products business, called Crompton Greaves Consumer Electricals Ltd. (CGCEL), will be demerged from CG into separate company, and be listed on the BSE and NSE.
“ Advent and Temasek have extensive financial sector and operational expertise, and we believe they are well-positioned to support CGCEL in its next phase of growth ”— Gautam Thapar, Founder and Chairman, Avantha Group
Following this, Advent and Temasek will make an open offer for additional shares of CGCEL as per the takeover code of Securities and Exchange Board of India (SEBI). The transaction, which values CGCEL at an enterprise value of Rs.6,600 crore, is subject to closing conditions and receipt of various statutory approvals.
Gautam Thapar, Founder and Chairman, Avantha Group, said the share purchase agreement was signed after an extensive search and careful evaluation.
“Both Advent and Temasek have extensive financial sector and operational expertise, and we believe they are well-positioned to support CGCEL in its next phase of growth,” Mr.Thapar said.
Out of the ring
1. Avantha decides to sell 34.37 per cent in CGCEL
2. CGCEL to be demerged from CG into a separate company
3. It will be listed on the BSE and NSE
4. Advent and Temasek to make an open offer for additional shares
5. Transaction to complete in the first quarter of 2016
“CGCEL is an attractive business that we believe will thrive as a standalone company,” said Shweta Jalan, Managing Director, Advent International. “It has leading positions in several fast-growing product categories with strong brand names and extensive distribution capabilities. Post completion, we look forward to driving growth by investing in sales and marketing, distribution and enhanced product offerings,” she said.
The transaction is expected to be completed in the first quarter of 2016.
As announced on March 3, 2015, all of CG’s shareholders will receive shares of CGCEL such that the shareholding of CGCEL upon completion of the demerger will mirror the shareholding of CG.
CGCEL has grown at a compound rate of 16 per cent per year over the past six years and generated revenue of Rs.2,850 crore for 2014-15.
“As a standalone company, CGCEL will be able to pursue more strategic goals and thus maximise value for all its stakeholders,” said Laurent Demortier, CEO and Managing Director, CG.
After the demerger, CGCEL will own CG’s consumer products business. The business manufactures and markets a wide array of consumer products, ranging from fans, lamps and luminaries to pumps and household appliances such as water heaters, mixer grinders, toasters, irons and electric lanterns. This business employs 3,500 people at six manufacturing facilities.
CG shares, on Friday, closed with a loss of 2.55 per cent at Rs.164.20 on the BSE.
