Heavy engineering major Larsen & Toubro (L&T) has signed definitive agreements with Schneider Electric for divesting the company’s electrical and automation (E&A) business for an all-cash consideration of Rs 14,000 crore, the company said in a statement on Tuesday.
The company’s E&A business, which reported net revenues of Rs 5,038 crore during the financial year ended March 31, 2017, offers low- and medium-voltage switchgear, electrical systems, marine switchgear, industrial and building automation solutions, energy management systems and metering solutions. Its manufacturing facilities are located at Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru in India as well as in Saudi Arabia, UAE (Jebel Ali, Dubai), Kuwait, Malaysia, Indonesia and the UK.
The transaction includes all the current business segments of E&A except marine switchgear and the UK unit Servowatch Systems. It is subject to regulatory approvals.
According to reports, the deal, which was in the works for long, took time due to differences on valuation. The deal has finally been struck at about 2.8 times revenues, which industry players consider a healthy price. Earlier, Siemens, ABB, Hitachi and Honeywell were also said to have shown interest in the business.
L&T said that over the years, the E&A business has built strong research and development capabilities and has a wide network of channel partners across India and international markets. The segment reported operating margins of 15.1 per cent in FY17, which increased from 12.5 per cent a year ago.
In what could be one of the biggest transactions in India so far in 2018, the deal forms a part of the overall strategy of L&T to divest non-core businesses and focus on key growth businesses like IT, technology services, defence, smart world and water management. FE