French electrical switch company Legrand has made an offer to buy the switchgear division of Indo Asian Fusegear for a total consideration of Rs 600 crore. The Board of Directors of Indo Asian Fusegear Ltd has, on July 22, 2010, approved the sale. Ambit Corporate Finance acted as the exclusive investment bankers to Indo Asian Fusegear Ltd.
The buyer will acquire the switchgear business for a purchase consideration of Rs 495 crore. The buyer will in addition pay to the company a non-compete fee of Rs 35 crore for a non-compete covenant for five 5 years. The promoters too have covenanted not to compete for the same period for an aggregate non-compete fee of Rs 35 crore. The buyer will also acquire, for a consideration of Rs 35 crore, the brands owned by Indo Asian Marketing Ltd., a company promoted by the promoters, and which are used by the switchgear business.
Indo Asian Switchgear is a major player in the retail market for protection devices (miniature and residual current circuit breakers, distribution boards, relays, etc.) while Legrand holds strong positions in both high value-added protection systems--mostly used in project business--and in premium wiring devices. With total revenues in FY10 in excess of Rs 230 crore, Indo Asian Fusegear Limited are the pioneers in manufacturing of CFLs in India. Legrand, the global specialist in electrical and digital building infrastructures, reported sales of €3.6 billion in 2009.
Indo Asian Fusegear hit the upper circuit today with share price going up by nearly 5% to Rs 108.75. At this price, the company has a market capitalisation of Rs 175 crore.
Ashish Dhawan, founder and senior managing director of Chryscapital, one of India's largest homegrown private equity funds, is the biggest non-promoter shareholder in the firm. Dhawan holds around an 8.38% or 1.35 million shares as of March 2010 in the company in personal capacity.
By removing the additional non-compete payment made to promoters, the deal translates into a value of Rs 350 per share.
Indo Asian Fusegear chairman and managing director VP Mahendru said, "The board has approved Legrand's offer. The company also has plans to pursue opportunities in the areas of advance lighting systems (including the most efficient lighting source-LED), and products for energy management and conservation." The board will be recommending a special dividend to the shareholders out of the proceeds of the sale of the switchgear business, added Mahendru.
Legrand India managing director Yves Martinez said, "It is our objective that Indo Asian switchgear division and Legrand will keep their current network, product catalogue, teams, commercial terms, and continue to develop fast on their own. We intend to accelerate the growth rate of both companies, by continuing sustained growth investments such as the launch of new products, the addition of commercial manpower.”