Rajesh Exports acquires Swiss gold refiner Valcambi for $400M

Rajesh Exports Ltd (REL), a Bangalore-headquartered public-listed gold jewellery manufacturer, has acquired the world's largest single location precious metal's refining company Valcambi for $400 million (Rs 2,560 crore) in an all-cash deal, it said on Monday.

It has acquired European Gold Refineries, the holding company of Valcambi, through its wholly owned subsidiary in Singapore.

With this acquisition, REL will become an integrated player covering precious metal refining & gold jewellery making and retailing. It has been looking at an integrated play across the gold value chain for long and this deal marks a culmination of that strategy.

Early this month, REL had received its board approval to acquire a European firm for up to $500 million but it did not reveal the name of the company.

Founded in 1961 by a group of Swiss entrepreneurs, Valcambi was owned by Credit Suisse from 1980 to 2003. Post that, the bank sold the refining firm to Newmont Mining Corporation, US-based gold mining giant, and to several Swiss investors (including former founders) to focus on its core banking business. Newmont and other owners of Valcambi conducted a global search for divesting Valcambi and picked Rajesh Exports as part of the sale plan.

Valcambi has a capacity to refine 1,600 tonnes of gold or altogether 2,000 tonnes of precious metals annually. The firm generated revenues of over $38 billion (Rs 2,36,500 crore) and EBITDA of $33 million (Rs 205 crore) by refining and selling 945 tonnes of gold and 325 tonnes of silver on an average per year for the last three years. Valcambi is a zero debt company with considerable cash surplus on its balance sheet.

Valcambi is also the majority shareholder of the subsidiary called  which carries out online sales of gold bars to small bullion buyers and for direct distribution to retailers.

“The coming together of REL and Valcambi would ensure that Valcambi improves on its global share of gold business, by opening up new markets in India, Middle East and China. Valcambi would also focus on forward integration and on innovative gold products in the European markets, by utilising the technical expertise of Rajesh Exports," said Michael Mesaric, CEO of Valcambi.

As a part of the deal, Mesaric along with his entire senior management team will join REL.

REL said the deal would be EPS accretive for the company.

"On a theoretical basis Valcambi is capable of supplying the entire gold requirement of India. This acquisition will add significantly to the revenues and profitability of REL group during the coming years," said Rajesh Mehta, chairman, Rajesh Exports.

Rajesh Exports manufactures both gold and diamond jewellery and exports its products globally. It is, however, associated more with its gold jewellery unit and has a large manufacturing plant in Bangalore which has an installed capacity to process 25 tonnes of jewellery per year. It also sells jewellery through Shubh branded speciality retail chain.

For the financial year 2014-15, REL posted revenues of over Rs 50,462.8 crore with net profit of Rs 655 crore.

Early this year, the company said it is getting into the gold finance business through which it would become the first large jewellery firm to get into the gold loan business.

Shares of Rajesh Exports were trading at Rs 543 each, up 2.64 per cent on BSE in a weak Mumbai market on Monday at 12.05 PM. The share price has risen over three times in the last one year.

Grant Thorton assisted Rajesh Exports in due diligence and Credit Suisse is part financing the acquisition through a long-term debt.

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