ET NowMotherson Sumi is set to buy Finland's PKC Group for over $600 mn. ET Now caught up with Vivek Chaand Sehgal of Motherson Sumi for his views on the deal. Excerpts:
ET Now: What kind of value addition will Motherson Sumi see from this acquisition?
Vivek Chaand Sehgal: PKC has manufacturing plants all over the world. Most importantly, they have a majority share in the US market. Together we can bring very good value to the deal because it will boost Motherson Sumi's core capability.
We believe there is tremendous opportunity available for us in the next 2-3 years.
ET Now: You propose to pay 50% premium over PKC's market price to the existing shareholders. What justifies such premium valuation?
Vivek Chaand Sehgal: Acquistion of PKC will help Motherson Sumi set up more factories and bag more orders in the next 10-15 years. We are giving the shareholders a good deal because we believe this aquisition will give us a 40% jump over 2-3 years.
We believe it is a reasonable price. PKC is a profit-making company.
ET Now: Can you share the financials for PKC? What kind of margins and sales do they clock?
Vivek Chaand Sehgal: PKC has 850-plus million euros. They are an EBITDA positive company. They have plants in US, Mexico and China. They have almost 21,000 people working for them.
We are very excited over this acquisition. The wiring harness division of Motherson is going to get a really big boost from this.
ET Now: By when do you expect to close this deal?
Vivek Chaand Sehgal: Depending upon regulatory approvals, we should be in a position to close it by March 31.
But we need approvals from US and Europe too. So it might take some time. We are, however, confident that by end of this year we should be able to control it — I mean by end of March 2017.
ET Now: Will you be looking at keeping PKC listed going forward?
Vivek Chaand Sehgal: We are going to follow the Finnish stock exchange laws. If we get even 90%, we can take over in full.
The board has already told us that the shareholders should accept the offer. And about the rest, I cannot predict what might happen.
ET Now: PKC is largely into customers, commercial vehicles and locomotives in the US, EU as well as China. Slower growth marks this segment. What sense does it make then to go in for this buy?
Vivek Chaand Sehgal: Your question is a right one, but we have been seeing green shoots lately. We brought the Stoneridge wiring harness division about two-and-a-half to three years ago.
We are very much aware of the US slowdown of the automotive truck market. But that is the reason why you should be more confident because I think the new situation in US will definitely show that the trucking market is going to improve more and more.
What is important is we have been seeing green shoots in the CV market in US. So we are not worried about that at all.
ET Now: You have raised funds via QIP recently. Will this acquisition be funded entirely by that equity?
Vivek Chaand Sehgal: We have very strong cash accruals. Funds have been raised by way of the QIP too. Just two months ago we had a preferential allotment. So, we have the required funding. We are not going to be borrowing or issuing fresh capital or something like that.
When the final figure comes, whatever little bit adjustment we need we will manage through short-term loans. But otherwise, I think we can manage it by ourselves.
ET Now: What kind of value addition will Motherson Sumi see from this acquisition?
Vivek Chaand Sehgal: PKC has manufacturing plants all over the world. Most importantly, they have a majority share in the US market. Together we can bring very good value to the deal because it will boost Motherson Sumi's core capability.
We believe there is tremendous opportunity available for us in the next 2-3 years.
ET Now: You propose to pay 50% premium over PKC's market price to the existing shareholders. What justifies such premium valuation?
Vivek Chaand Sehgal: Acquistion of PKC will help Motherson Sumi set up more factories and bag more orders in the next 10-15 years. We are giving the shareholders a good deal because we believe this aquisition will give us a 40% jump over 2-3 years.
We believe it is a reasonable price. PKC is a profit-making company.
ET Now: Can you share the financials for PKC? What kind of margins and sales do they clock?
Vivek Chaand Sehgal: PKC has 850-plus million euros. They are an EBITDA positive company. They have plants in US, Mexico and China. They have almost 21,000 people working for them.
We are very excited over this acquisition. The wiring harness division of Motherson is going to get a really big boost from this.
ET Now: By when do you expect to close this deal?
Vivek Chaand Sehgal: Depending upon regulatory approvals, we should be in a position to close it by March 31.
But we need approvals from US and Europe too. So it might take some time. We are, however, confident that by end of this year we should be able to control it — I mean by end of March 2017.
ET Now: Will you be looking at keeping PKC listed going forward?
Vivek Chaand Sehgal: We are going to follow the Finnish stock exchange laws. If we get even 90%, we can take over in full.
The board has already told us that the shareholders should accept the offer. And about the rest, I cannot predict what might happen.
ET Now: PKC is largely into customers, commercial vehicles and locomotives in the US, EU as well as China. Slower growth marks this segment. What sense does it make then to go in for this buy?
Vivek Chaand Sehgal: Your question is a right one, but we have been seeing green shoots lately. We brought the Stoneridge wiring harness division about two-and-a-half to three years ago.
We are very much aware of the US slowdown of the automotive truck market. But that is the reason why you should be more confident because I think the new situation in US will definitely show that the trucking market is going to improve more and more.
What is important is we have been seeing green shoots in the CV market in US. So we are not worried about that at all.
ET Now: You have raised funds via QIP recently. Will this acquisition be funded entirely by that equity?
Vivek Chaand Sehgal: We have very strong cash accruals. Funds have been raised by way of the QIP too. Just two months ago we had a preferential allotment. So, we have the required funding. We are not going to be borrowing or issuing fresh capital or something like that.
When the final figure comes, whatever little bit adjustment we need we will manage through short-term loans. But otherwise, I think we can manage it by ourselves.
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