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Advent to lead acquisition of 34.37% of CG consumer products business from Avantha Holdings

Also Temasek will be an independent co-investor besides Advent in CGCEL

April 24, 2015. By Moulin

Advent International and Avantha Holdings Limited has 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 the National Stock Exchange of India (“NSE”) and Bombay Stock Exchange (“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 luminaires 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 is pleased to have signed a share purchase agreement for the sale of its stake in Crompton Greaves’ consumer business,” said Gautam Thapar, Founder and Chairman of the Avantha Group. “Both Advent and Temasek have extensive financial, sector and operational expertise, and we believe they are well-positioned to support CGCEL in its next phase of growth. I thank all of CGCEL’s employees who have given their best and firmly believe that they will benefit from further expansion and focus under the new stewardship.”

“CGCEL is an attractive business that we believe will thrive as a standalone company,” said Shweta Jalan, Managing Director at Advent International in Mumbai. “It has leading positions in several fast-growing product categories with strong brand names and extensive distribution capabilities. Post completion, we 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. With India’s GDP growth expected to accelerate in the coming years, prospects for the country’s consumer segment remain strong.

“As a standalone company, CGCEL would be able to pursue more strategic goals and thus maximize value for all its stakeholders,” said Laurent Demortier, CEO and Managing Director of CG. “I would like to thank our colleagues in the consumer products business for their commitment and achievements, and I am confident that they will continue to benefit as the business pursues further growth in India and beyond.”

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