Auto-component maker Motherson Sumi Systems Ltd said on Friday it will acquire Bombardier Transportation (Rolling Stock) UK Ltd’s assets used to produce and install electrical components and systems for the rail industry.
Motherson Sumi has agreed to pay 10.87 million pounds (Rs 102 crore or $14.4 million) for the transfer of assets, employees and inventories minus Bombardier’s debt and cash, India’s largest auto ancillary company informed stock exchanges.
The transaction is being routed through Finland-based publicly traded wiring systems and electronics company PKC Group, which Motherson Sumi acquired nearly two years ago to expand its footprint in the American and European commercial vehicle segment.
The assets comprise Bombardier’s manufacturing of wiring harnesses, panel and cabinet build and electromechanical assemblies in Derby, UK. As part of the deal, Motherson Sumit will also lease Bombardier’s Derby site and continue to operate the business with existing employees.
The acquisition, expected to close by next quarter, will help Motherson Sumi expand its supply of electrical and wiring systems to Bombardier Transportation and cover UK rolling stock projects.
Bombardier’s electrical components and systems clocked 36 million pounds in revenue (provisional) for the year ended December 2018, Motherson Sumi said.
Motherson Sumi, through PKC Group, makes wiring harnesses for rolling stock, mainly in Europe and North America. In fact, PKC Group entered the rolling stock business by acquiring Poland-based Kabel–Technik–Polska Sp. z o.o. in 2015 and executed a global partnership agreement with Bombardier Transportation GmbH in 2016.
Bombardier Transportation’s offerings for the rail industry range from trains to sub-systems and signalling to complete turnkey transport systems, e-mobility technology and data-driven maintenance services. Berlin-based Bombardier Transportation employs around 40,650 people. It has a presence in over 60 countries.
The asset purchase from Bombardier in the UK is Motherson Sumit’s first acquisition for 2019. The company struck several acquisitions last year, and has been scouting at least half a dozen targets to expand its global footprint.
Last April, Motherson Sumi had agreed to acquire the Netherlands-based Reydel Automotive Group for $201 million (Rs 1,307 crore) in cash from US-based alternative investment firm Cerberus Capital Management.
In January 2018, group company Samvardhana Motherson International Ltd acquired MS Global India Automotive Pvt. Ltd from South Korea-based MS Group.
VCCircle had reported last December that Motherson was looking to acquire Germany-based automotive cable maker Leoni AG, which makes automotive cable and components, assembly and harnesses, and cable systems for customers such as Audi, BMW, Schneider Electric and Caterpillar.
Motherson Sumi is the flagship company of the $11.5 billion Samvardhana Motherson Group. Japan’s Sumitomo Wiring Systems holds a minority stake in the company. The company has presence in 41 countries. The group has over 270 facilities and employs over 135,000 professionals worldwide.
The company has grown rapidly thanks partly to the near two-dozen acquisitions it had made since 2002. In 2014, it agreed to acquire US-based Stoneridge Inc’s wiring harness business for $65.7 million. Its other noticeable purchases include the acquisition of the mirror business of Visiocorp in 2009 and Peguform in 2011.
Motherson Sumi’s consolidated revenue has grown at a compound annual pace of nearly 35% for the past 10 years. It clocked Rs 56,521 crore in consolidated revenue and Rs 2,259 crore in net profit for the year ended March 2018. It has nearly Rs 1,200 crore in debt as on March 2018, majority of which has been accumulated for acquisition financing.
The company is targeting $18 billion (Rs 1.27 lakh crore at current exchange rates) in consolidated revenue by fiscal 2020. It has clear visibility with respect to its revenue target for 2020. It acquires companies not only with a sole focus of increasing the top line but also having return on capital employed (ROCE) of 40%, according to its 2018 annual report.