KEC International, part of the diversified RPG Group, has acquired US-based SAE Towers Holdings for $95 million (Rs 418 crore) on a cash and debt free basis. SAE Towers, owned by US-based private equity firm ACON Investments, was formed after a spin out from Swiss major ABB. The deal value of $95 million does not include the adjustments for working capital.
VCCircle was the first to report in July that KEC was mounting a bid for SAE. Sources said that KEC is funding the deal with a $125 million debt funding from ICICI Bank, and this figure includes some headroom for working capital and other expenses that come along with the acquisition.
KEC had emerged as the frontrunner even though a share purchase agreement was signed only this week.
KEC is an EPC player in areas like power and telecom infrastructure with operations currently spanning over 20 countries. The deal is expected to close this month and will be EPS accretive from FY2010-11.
The share price of KEC International went up by more than 6% after the announcement before coming down to Rs 498.2, still up by 2.45% at 11:38 AM.
SAE Towers is one of the world’s largest producers of steel lattice towers for high-voltage power transmission with manufacturing plants located in Mexico and Brazil. These facilities encompass approximately 475,000 square feet and are capable of producing in excess of 100,000 tons annually. SAE also makes steel poles for electrical transmissions as well as related hardware.
In 2007, SAE was acquired by ACON in a spin-out of the electricity tower manufacturing division of ABB, the Switzerland-based power and automation MNC. SAE currently has around 750 employees.
SAE Towers' EBITDA increased from $3.5 million in 2007 to a budget of approximately $19.1 million in 2010. The deal will yield proceeds representing over 3.6x returns for ACON, which manages approximately $1.7 billion of capital.
"The acquisition will strengthen KEC's global leadership position in large and growing markets of North America and Latin America," said Ramesh Chandak, MD and CEO of KEC. "We expect the combined entity to derive significant operational synergies, procurement and administrative cost saving and marketing opportunities. Going forward, we expect to leverage SAE Towers' existing customer relations for KEC's other business segments as well."
"The development of power infrastructure in Brazil and Mexico will represent a compelling market for KEC for many years to come as power consumption outpaces GDP in these markets. In addition, KEC and SAE Towers are uniquely positioned to play a key role in expanding and upgrading of the US and Canada power grid, where significant investment is required to improve reliability and support of development of new wind, solar and conventional generation," said Luis Ruggieri, CEO of SAE Towers.
KEC was advised by Sagent Advisors Inc and Daiwa Capital Markets India as financial advisors, KPMG as accounting advisor, and Khaitan & Co and White & Case LLP as legal advisors on the deal.
KEC reported revenues of Rs 3,952 crore in FY10, an increase of over 13% as compared to the previous fiscal's Rs 3,482 crore. It reported a more than 60% growth in net profits with a number of Rs 190 crore in FY10. The firm has operations in markets across Asia and Africa.
KEC recently announced the merger of RPG Cables Ltd with itself, which may result in operational synergies between the two companies.