Private equity firm Advent International will lead the acquisition of 34.37% stake in Crompton Greaves Consumer Electricals, along with Temasek
Mumbai: Private equity firm Advent International on Friday announced that it has signed a share purchase agreement with Avantha Holdings Ltd, the promoter of Crompton Greaves Ltd, whereby Advent will lead the acquisition of 34.37% stake in Crompton Greaves’ consumer products business.
Another leading private equity firm, Temasek Holdings, will be a co-investor along with Advent for the stake in Crompton Greaves Consumer Electricals Ltd (CGCEL).
The transaction values CGCEL at an enterprise value of Rs.6,600 crore ($1.07 billion).
CGCEL will be demerged from Crompton Greaves into a stand-alone company and will consequently be listed on the National Stock Exchange of India (NSE) and BSE Ltd.
Thereafter, Advent, a global private equity firm with a dedicated presence in India, and Temasek, an investment company based in Singapore, will make an open offer for additional shares of CGCEL in compliance with takeover regulations.
The transaction is subject to closing conditions and receipt of all statutory and other approvals, including the successful demerger of CGCEL from Crompton Greaves and the approvals of the Reserve Bank of India (RBI) and the Competition Commission of India, Advent said in a statement.
In July 2014, Crompton Greaves, which makes products ranging from transformers to electrical appliances, had decided to demerge its consumer products business unit into a separate publicly traded firm, as a prelude to a potential stake sale. Fans, appliances, lighting, pumps, home automation, integrated security systems and wiring accessories come under the consumer products business unit. The firm has two more business divisions: power systems (that makes switch gear products) and industrial systems (that makes generators).
At the time, the firm said the demerger will create better growth opportunities for its two large but significantly different businesses: power, industrial and automation (B2B, or business to business) and the consumer products business (B2C, or business to consumer).
The idea was to allow the two businesses to grow independently, pursue more ambitious strategic goals and, thus, create further value for existing shareholders, the company had said in July. In March 2015, Crompton Greaves had secured necessary approvals to demerge its consumer product business into a separate listed entity. The new firm—CGCEL—will be a new operating company from 1 October 2015 under the so-called scheme of arrangement.
For the quarter ended 31 March 2014, the consumer products division registered a revenue of Rs.748.36 crore, contributing a little more than one-third to the company’s total revenue. The company has lately been focusing more on its consumer durables segment. For instance, in the fiscal 2014, Crompton Greaves increased its reach by adding 11,150 new retailers and 194 distributors, according to its annual report.
Founded in 1984, Advent International is one of the largest global private equity investors. Since inception, the firm has invested in more than 290 buyout transactions in 39 countries. The firm has €25 billion in assets under management with special focus on consumer business, according to its website. Temasek is an investment company based in Singapore, with a S$223 billion portfolio as on 31 March 2014.