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Murugappa group company Tube Investments of India is set to acquire a 44.12 per cent stake from promoters of Coimbatore-based Shanthi Gears for Rs 292 crore. .
Tube Investments (TI) has signed a share purchase agreement to acquire 3.6 crore equity shares of Re 1 each from the promoters of Shanthi Gears, at Rs 81 a share.
TI will make an open offer to the shareholders of Shanthi Gears to acquire from them 2.12 crore equity shares; this represents 26 per cent of the paid-up share capital of Shanthi Gears.
The total cost of the acquisition, including the public offer, is expected to be Rs 464 crore, assuming full response to the proposed open offer, said TI in a release.
Scale up business
Shanthi Gears manufactures industrial power transmission products such as gears, gear boxes, geared motors and gear assemblies. It has been designing, manufacturing and supplying various kinds of gears and gearboxes to several industries for a variety of applications over the past four decades.
The company has six manufacturing units in Coimbatore, including a foundry division; it markets its products in India as well as abroad. The turnover of the company was Rs 178 crore in financial year 2011-12 with a net profit of Rs 28 crore. Shanthi Gears was a debt-free company as on March 31, 2012, said the release.
Mr M. M. Murugappan, Chairman, Tube Investments and Vice-Chairman, Murugappa Group, said: “Shanthi Gears is one of the largest organised players in India in the gears segment and its product profile is targeted towards more of niche products. We hope to leverage our understanding of the engineering space and our existing customer relationships to help scale the business further.”
The move is also expected to help TI de-risk itself from the auto industry. Mr L. Ramkumar, Managing Director, Tube Investments, said, “Addition of Shanthi’s product portfolio substantially enhances our ability to service other industry segments and reduce our reliance on the auto sector. It will also help expand our industrial power transmission business, which currently manufactures industrial chains.”
The acquisition will be funded by both debt and equity. It will be completed in the next two months.
TI’s major products are precision cold rolled strips, welded tubes, chains, e-Scooters, bicycles and fitness equipment. It posted a turnover of Rs 3,659 crore in 2011-12.
TI shares were up 6.2 per cent on the BSE, at Rs 154.75 on Friday.
READ ALSO: >The Gear Man of Coimbatore
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