Motherson to Buy 80% in Germany’s Peguform

Deal size pegged at . 2,229 crore, co likely to close the transaction in two-three months

OUR BUREAU NEW DELHI

    Auto parts maker Motherson Sumi Systems (MSSL) on Wednesday said it plans to acquire an 80% stake in Germany's Peguform Group from Cross Industries for an undisclosed amount.
The world’s largest producer of rear view mirrors for passenger cars is expected to close the deal in 2-3 months and will fund it through debt from Indian lenders, said VC Sehgal, vice-chairman, Motherson Group.
Austrian automotive group Cross Industries will continue to hold the balance 20%. Investment bankers peg the valuation for an 80% stake at $500 million (. 2,229 crore). Peguform has posted a turnover of . 8,548 crore for the 2010 calendar year.
Shares of Motherson Sumi fell on concerns regarding valuations and pressure on margins. Motherson Sumi, whose shares rose by more than 7% before the announcement on the Bombay Stock Exchange, reversed gains and were down more than 2% at . 234.25 after 12.15 pm.
“It is excessively overvalued and the entire deal is being funded through debt,” said a Mumbai-based auto analyst. Analysts, however, say that margins will improve in the long term.
“The acquisition is very significant as it would add to the top line. However, there are concerns that the acquisition would impact margins in the near term. Motherson Sumi is known to improve performance of acquired companies, which will help bolster margins,” said Yaresh Kothari, analyst at Mumbai-based broking firm Angel Broking.
The acquisition will help the Delhibased joint venture between Motherson group and Japanese major Sumitomo boost its auto parts business as Peguform sells plastic components for vehicle exteriors, dash boards and bumper systems to European carmakers such as Volkswagen and BMW.
“Peguform complements our polymer product range in India, making us one of the largest players globally,” said Sehgal.
    The acquisition will be made through a special purpose vehicle, in which Motherson Sumi Systems will hold a 51% stake and group firm Samvardhana Motherson Finance will own 49%. PwC was the advisor to the deal.
Motherson plans to start the process of deriving synergies from Peguform shortly and complete the integration once the regulatory approvals are in place. “We will explore synergies with our auto moulding business till the approvals are in place,” said GN Gauba, chief financial officer of MSSL.
VC Sehgal started the company in 1977 and established a joint venture with Japanese major Sumitomo in 1983. The joint venture has now presence in 23 countries with 100 manufacturing facilities.
“With this acquisition, our group aims to reach a turnover of $5 billion in two years,” said Sehgal. MSSL, with a turnover of . 8,176 crore, is the flagship company of the Samvardhana Motherson Group.