Blackstone selling auto parts co Agile Electric for $106M; score 2x in under two years

Private equity firm Blackstone has inked a deal to sell its entire stake in privately held auto parts maker Agile Electric Sub Assembly Pvt Ltd to Japan's Igarashi Electric Works Ltd and Indian investment bank MAPE Advisory Group for $106.4 million (Rs 655 crore).

This comes just one-and-a-half years after it acquired the firm and backed the management buyout of its public listed subsidiary Igarashi Motors.

The PE firm had picked 97.9 per cent stake in Agile Electric, which is engaged in the production of DC motor sub-assemblies, from existing investors HBL Power Systems besides individual shareholders KK Nohria, Padmanaban Mukund and Jose Joseph, for Rs 332.36 crore ($55 million) in August 2013.

Agile Electric held 62.8 per cent of public listed auto component firm Igarashi Motors and the transaction triggered an open offer. In a parallel move in the two-tier deal, Igarshi Motors’ managing director and one of the shareholders of Agile Electric, Padmanaban Mukund subscribed to optionally convertible debentures which later gave him around 32 per cent of Igarashi Motors for around Rs 60 crore.

They had later made an open offer which did not garner much and together they hold 74.5 per cent stake. Out of this 41.92 per cent is with Agile Electric and the rest 32.6 per cent is with Mukund.

Now Blackstone is selling its entire stake in Agile which would also trigger another open offer.

This makes it an unusual deal for two reasons. For one, Blackstone typically doesn’t make quick churn of its portfolio and in this case it is exiting in just one-and-a-half years (click here to read on the trend of PE firms pressing on the exit button sooner than what they do conventionally).

Calls and emails sent to Blackstone on its decision did not immediately elicit a response.

The deal is also unusual as a boutique investment bank is coming in as a co-promoter of the listed firm.

“Igarashi Electric Works is an old client of ours and they desperately wanted to come back; so we thought let's work it out together,” Jacob Mathew, managing director at MAPE Advisory Group, told VCCircle.

This transaction has triggered an open offer to the public shareholders of Igarashi Motors India as it breaches the 26 per cent stake threshold.

Religare Capital is the manager to the open offer and the offer price is expected to be in the range of Rs 307-308 per share. The tender offer size is estimated to be around Rs 245 crore.

Igarashi Motors' scrip rose 0.14 per cent to close at Rs 347.05 a share on BSE in a strong Mumbai market on Thursday. Although the news of the deal came after market hours, the stock saw spike in price in intra-day trades which indicates the news had broken out in the investor circles. The stock, however, ended just marginally up at the end of the day.

It could not be immediately ascertained if Mukund would stay with Igarashi Motors or move on by participating in the tender offer to sell some of his stake.

Igarashi Motors was set up as a JV around two decades ago between Japan's Igarashi and Crompton Greaves. Later Crompton Greaves exited. Igarashi too sold its stake in the public listed firm in 2010-11 to HBL Group and its group firm Agile Electric. It had sold shares at around 60-70 a share and is now buying it at a valuation of six times that level. Notably, MAPE was its advisor when it sold out its stake in the Indian arm.

This deal would bring it back in action in the country. Since it sold the firm, Igarashi Motors' revenue has more than doubled while its net profit has climbed almost 17 times.

Igarashi Motors' ended FY14 with net sales of Rs 361.23 crore and net profit of Rs 46.14 crore.

For Blackstone, this would be the third significant exit from an Indian portfolio firm after Intelenet Global in 2010-11 and Emcure Pharma in 2013. While Intelenet was through a strategic sale, Emcure was through a secondary PE deal where Bain bought it out. Earlier, Blackstone was eyeing an IPO-led exit from Emcure.

Last year Blackstone made part exit from its underwater investment in Gokaldas Exports. It has also sought an IPO for another portfolio firm Gateway Rail Freight.

(Edited by Joby Puthuparampil Johnson)

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