Advent to lead acquisition of 34.37% of Crompton Greaves consumer products business

Advent to lead acquisition of 34.37% of Crompton Greaves consumer products business

Advent International (“Advent”)

Advent International is an American global private equity firm focused on buyouts of companies in Western and Central Europe, North America, Latin America and Asia.

Avantha Holdings Limited (“Avantha”)

Avantha Group is an Indian business conglomerate led by Gautam Thapar. The company is one of India’s largest business conglomerates. Its businesses include power generation and distribution, power transmission and distribution equipment and services, paper and pulp, food processing, farm forestry, chemicals, infrastructure, Information Technology and Information Technology Enabled Service (ITeS), BPO.

Avantha Group operates in 90 countries with over 25,000 employees worldwide. Business units include, Crompton Greaves, (CG) India’s largest power transmission and distribution equipment company, and Ballarpur Industries (BILT), India’s largest paper manufacturer, both listed on the Indian Stock exchanges.

Advent and Avantha, announced that they have signed a share purchase agreement whereby Advent will lead the acquisition of 34.37% of CG’s consumer products business, Crompton Greaves Consumer Electricals Limited (“CGCEL”). Temasek will be an independent co-investor alongside Advent in CGCEL.

CGCEL will be demerged from CG into a standalone company and will consequently be listed on NSE and BSE. Thereafter, Advent, a global private equity firm with a dedicated presence in India, and Temasek, an investment company based in Singapore, will make an open offer for additional shares of CGCEL in compliance with takeover regulations. The transaction values CGCEL at an enterprise value of INR 66 billion (US$1.07 billion). The transaction is subject to closing conditions and receipt of all statutory and other approvals, including the successful demerger of CGCEL from CG and approval from the Reserve Bank of India and Competition Commission of India.

CGCEL, one of CG's largest and fastest-growing businesses, manufactures and markets a wide spectrum of consumer products, ranging from fans, lamps and luminaries to pumps and household appliances such as water heaters, mixer grinders, toasters, irons and electric lanterns. The business is India’s market leader in fans, No. 1 player in residential pumps and has leading market positions in its other product categories. It employs approximately 3,500 people and has six manufacturing facilities.

After an extensive search and careful evaluation, Avantha signed a share purchase agreement for the sale of its stake in Crompton Greaves’ consumer business.

CGCEL has leading positions in several fast-growing product categories with strong brand names and extensive distribution capabilities. Post completion, it look forward to driving growth by investing in sales and marketing, distribution and enhanced product offerings.

Demerger and share purchase details

Advent and Temasek will acquire ownership in CGCEL by purchasing shares in CGCEL from Avantha Holdings following the demerger of the consumer products business from CG and the listing of CGCEL on the BSE and NSE. The transaction is expected to be completed in the first quarter of 2016.

CG had filed with the BSE on March 3, 2015, regarding the demerger of CG’s consumer business into CGCEL, whereby all of CG’s shareholders will receive shares of CGCEL such that the shareholding of CGCEL upon completion of the demerger will mirror the shareholding of CG.

CGCEL’s growth and consumer product market growth

CGCEL has grown at a compound rate of 16% per year over the past six years and generated revenue of INR 28.5 billion (US$459 million) for the fiscal year ended March 31, 2014. The business has benefited from robust long-term growth in the Indian consumer products market, where sales volume has increased approximately 1.5 to 1.9 times India’s real gross domestic product (GDP) from 2002 to 2014.