INDIA BUSINESS WORLD - APRIL - MAY 2007
The Month that was ...

COIMBATORE'S SAKTHI AUTO COMPONENT BUYS EUROPE COS FOR € 95 M

In what is billed as one of the largest overseas takeover deals in the auto component sector, Coimbatore-based Sakthi Auto Component (SAC), a subsidiary of Sakthi Sugars, has acquired Intermet Europe, a group of companies, from Intermet International US for € 95 million (Rs 532 crore).

Intermet Europe, which owns and operates two plants in Germany and one in Portugal, is engaged in precision castings in ductile iron for the automotive industry, with an annual capacity of 1.65 lakh metric tonnes. SAC owns and operates two plants in India producing ductile and grey iron precision castings with a capacity of 60,000 metric tonnes. The acquisition was completed by raising € 75 million through the loan route and the balance via investment by its parent company and preference shares. Around € 10-15 million has been invested by Sakthi Sugars.

The combined entity, based in Germany, would be known as Sakthi Automotive Group, SAC chairman and managing director M Manickam said addressing through a video-conference from Germany. Mr. Manickam said the good synergy in the business would help the group to access European markets, apart from benefiting from the transfer of technology and available manpower. "SAC would benefit through technology at a much higher level as they are at least 10 to 15 years ahead of us," he added.

On how long SAC would continue to ride piggy-back on Sakthi Sugars, he said it had to attain a critical size in the global scale which would be $1billion.

"Right now, it is the 100% wholly subsidiary, which has been getting a monthly business of Rs 20 crore. In the coming year, while we are aiming for a Rs 300 crore business, Intermet Europe is expected to contribute € 180 million (Rs 1,100 crore)," he added.

Sakthi Automotive Group chief executive Laurence Vine-Chatterton said the Intermet Europe's client list included TRW, PSA and Bosch.

Intermet Europe, which is on profit track for two decades now, recorded a turnover of € 165 million last year, with an EBITA at € 13 million. The closely-held company has projected e180 million for the current year.

After 4-5 month-long negotiations, SAC has made the acquisition through an open auction, conducted by Rothschild, he said, not ruling out further acquisitions.