JTEKT Corp to buy out Indian partner in Sona Koyo Steering

Japan’s JTEKT Corp on Wednesday inked an agreement to buy out its Indian joint venture partner from auto component maker Sona Koyo Steering Systems Ltd and made an offer to acquire additional stake from public shareholders.

JTEKT will buy the 25.12% stake held by Sona Autocomp Holding Ltd and the Indian promoter family in Sona Koyo for Rs 419.3 crore ($62 million), according to a stock-exchange filing on Wednesday.

The Japanese company has also made an open offer to acquire up to a 26% stake in Sona Koyo from public shareholders for about Rs 434 crore. JTEKT currently holds a 20.1% stake in the Indian company.

Shares of Sona Koyo climbed 3.24% to Rs 84.45 apiece on the BSE, crossing the Rs 84 offer price. The closing share price gives the maker of steering systems for cars and utility vehicles a market value of Rs 1,677 crore.

The Indian company separately said the deal gives it an enterprise value of Rs 1922.5 crore. The deal value represents a 10.1x multiple of Sona Koyo's earnings before interest, tax, depreciation and amortization for the 12 months ended 30 September 2016, the company said.

The transaction, which is likely to close in the April-June quarter, is subject to regulatory clearances by the Competition Commission of India (CCI) and certain other conditions.

Sunjay J Kapur, chairman of Sona Koyo, and its nominee directors Rani Kapur and Kiran Deshmukh, will step down from the board when the transaction is completed. 

Kapur, who took over as chairman of the Rs 5,000 crore Sona Group in 2015, said that the transaction will allow the group to focus on its investments in its fast-growing Precision Forging Ltd's business.

The transaction will also result in a partial exit for JM Financial Private Equity Fund, which made an investment in Sona Autocomp Holding Ltd in 2007, the company said.

Kotak Investment Banking and SMBC Nikko acted as exclusive financial advisers to JTEKT Corp. Kotak is also the manager to the open offer being made by JTEKT. JM Financial Institutional Securities Ltd acted as the sole financial adviser and Cyril Amarchand Mangaldas acted as the sole legal advisor to Sona Autocomp Holding on this transaction.

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