Motherson Sumi Systems Ltd (MSSL), the flagship company of the
$ 2.7 billion Samvardhana Motherson Group, has given its in-principle approval to the acquisition of 80 percent of the shareholding of the Peguform Group of Germany from Cross Industries AG, jointly with Samvardhana Motherson Finance Ltd. The acquisition would be made through a joint venture in which MSSL would hold a 51 percent share and Samvardhana Motherson Finance would hold the balance 49 percent stake.
Vivek Chaand Sehgal, chairman of the Samvardhana Motherson Group and vice-chairman of Motherson Sumi Systems, says the company had given a 2010 guidance forecasting a $5 billion turnover by 2014-15 but with this acquisition and the turnover of 2011-12, it is expecting to finish the target on the topline.
Meanwhile, MSSL’s agreement with Cross Industries spans an 80 percent stake in Peguform GmbH and Peguform Iberica SL together with a 50 percent stake in Wethje Entwicklungs GmbH and Wethje Carbon Composite GmbH to be acquired through a special purpose vehicle. The total share consideration for this transaction is pegged at Euros 141.5 million, of which MSSL’s share will be Euro 72.165 million.
Sehgal says the company proposes to raise overseas loans to fund this transaction. “The deal will be completed by September-end, by when all closing conditions including regulatory approvals are expected to be received,” he adds.
According to Sehgal, the expected turnover of Peguform in 2011 will be Euro 1.6 billion. Peguform’s 2010 sales were 1.37 billion Euro with a reported EBIDTA of Euro 66.87 million.
“We succeeded in finding a strategically-oriented majority shareholder for Peguform, who will accelerate the growth of our new company especially in the new international markets and will thus expedite the success course that Peguform has embarked upon,” says Klaus Rinnerberger, Peguform’s CEO.
Peguform, which is headquartered at Bötzingen, Germany, has 22 facilities including five module centres and 17 production sites across the world. Peguform-Beteiligungs-GmbH, based in Austria, is the parent company of the Peguform Group. It is in turn owned by Cross Industries AG, a holding company with focus on the automotive sector. MSSL is targeting a fruitful association in the auto business in the long term with this acquisition as well as expansion of its global footprint.
Further, Sehgal feels the Samvardhana Motherson Group has a strong experience of acquisitions. The acquisition of Visiocorp to form SMR, then achieving profitability of the venture in the first year of acquisition and integrating it with SMG were a useful learning experience for the Group.
Expanding MSSL's global reach
MSSL through its divisions has been in the field of plastic moulding, assemblies and module integration for more than a decade. The acquisition of the Peguform business would be in line with its existing businesses in India and will add significant value by integrating and consolidating its Indian and global business.
Sehgal says, “Apart from the synergies that SMG will bring to the acquired entity, the product range of Peguform complements our polymer product range in India. There are obvious synergies in terms of customers served which will further strengthen the position of the Group as a global module supplier to automotive OEMs.”
Peguform is the second largest supplier of door panels and the third largest supplier of instrument panels in Germany. Besides, it is a market leader in bumpers in Germany with Volkswagen, Daimler, Renault-Nissan and BMW as important customers.
VW accounts for about 23 percent of its sales with the balance contributed by Daimler and BMW. About 50 percent of Audi cockpits and door trims are made by Peguform with Peguform being the supplier for the B-plus segment to the top end.
“When Indian car production goes upto 10 to 11 million, MSSL would not have stood a chance to support international players. Peguform with its new technologies will support MSSL, especially as freight-unfriendly cockpit modules have to be manufactured next to the carmaker,” Sehgal explains.
Besides, the combination would enable a presence in India for Peguform. An increased presence in the BRIC countries would be brought on board as Peguform has two plants in Brazil and another in China. With carmakers locating plants in these geographies, module suppliers have to be in close proximity.
The Samvardhana Motherson Group produces electrical distribution systems like wiring harnesses, automotive rearview mirrors, moulded plastic parts and assemblies, injection moulding tools, moulded and extruded rubber components, modules and systems including cockpits, door trims, bumpers, lighting systems, air intake manifolds, pedal assemblies among others. The Group has a nearly 25 percent share of the global passenger car exterior rearview mirror market and an over 65 percent share of the passenger car wiring harnesses in India. It also leads in plastic modules to the automotive sector.