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Kolkata-based Kanoria Chemicals and Industries (KCI) on Friday entered into an agreement to acquire the Switzerland-based APAG Holding AG.
APAG is a profit-making venture selling lead-based electronic control devices to leading luxury automobiles makers in Europe.
KCI will acquire 90 per cent stake in APAG Holding at an estimated investment of CHF 6.39 million (approximately Rs 36 crore at the current exchange rate) on closure of the transaction. The company will also be acquiring APAG's loan amounting to CHF 1.30 million (Rs 7 crore).
According to Mr N.K. Nolkha, Chief Financial Officer, KCI, APAG Holding is a partnership firm and has three shareholders out of which two are “sleeping partners”.
“The third partner, who was actually running the show, will retain the 10 per cent stake. He will help us run the business profitably for the next two years,” Mr Nolkha told Business Line .
KCI will acquire the balance 10 per cent by 2014 on the basis of a pre-fixed pricing formula. The estimated investment for the 10 per cent stake will be determined based on the current base price per share and the premium linked to future profits.
If the partner decides on an early exit, the price consideration will depend on the base price per share estimated at Rs 4 crore.
Having sold its chloro chemicals business to Aditya Birla Group for Rs 830 crore, KCI has been exploring diversification in knowledge- based industries.
The attractive valuation in Europe and the steady demand from luxury automobile manufacturers were some of the key reasons for considering this acquisition, Mr Nolkha said.
KCI, would, however, not be able to disclose the names of the buyers of these equipment as the company is under secrecy clause. However, seven out of every 10 luxury car manufacturers in Europe procure equipment from APAG, he added.
Even if there was no growth in the segment, the deal would be value for money for KCI as the company will gain knowledge and expertise of a new industry.
“With fast increasing demand in the high-end automotive segment both in India and globally, the knowledge base of APAG can be leveraged for future expansion in various geographical segments,” he said.
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