Automotive parts maker Motherson Sumi Systems will acquire Germany's Scherer & Trier in a deal worth Rs 283 crore . While the acquired company is not profit-making yet, it will be earnings per share (EPS) accretive from the first year itself, says Vivek Chand Sehgal, chairman, Motherson Sumi Group.
In an interview to CNBC-TV18, Sehgal says the acquisition is debt-free and another similar deal is on the anvil.
The deal would further consolidate Motherson Sumi System's "polymer business in Europe and North America".
According to a statement released by Motherson Sumi, "The German entity develops and manufactures extrusion profiles, moulded parts made of thermoplastics and hybrid components made of metal and plastic catering to Original Equipment Manufacturers like Audi, BMW, Diamler, Ford, GM, VW etc, along with other customers."
Below is the verbatim transcript of Vivek Chand Sehgal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Can you tell us if this acquisition is EPS or earnings accretive?
A: Yes, in the first year itself this company would be accretive till the EPS for the first year itself.
Sonia: We understand that the turnover of this company is 240 million euros but is it profit-making?
A: Not when we take it over but as soon as we take it over, we have all the reasons why we can turn it around very quickly.
Latha: How much is its EBITDA or profit now and where do you see it?
A: What is important is when we buy the company, it is coming from an administrator so the whole deal has to be closed by January. So once that is done, I will be able to give you more colour on that.
Latha: Would you give us a ballpark number of how much you will have to spend if it is from an administrator, you may have to settle some debt so the cost will not be 36 million, it may be a little more?
A: We are not taking over any debt as such. It is a debt-free kind of an acquisition. But we will be buying the inventories and we will be buying the land building etc. So you would understand that I cannot give you a number because it is in a state of flux at the moment because it is with the administrator. We don't know what the value of the inventories are and what the balance sheet would look like, but we are very sure that in the first year it will be EPS accretive.
Sonia: Can you tell us what the margin profile of this company could be in the next couple of years and since you have acquired it through Samvardhana Motherson Reflectec (SMR), what would the blended margins look like?
A: It is not being acquired by SMR, it is being acquired by PV company, which is a joint holding company, which owns Samvardhana Motherson Peguform (SMP) and SMR PV. The company has enough wherewithal to not to take any further loans or anything like that and to buy this company just by their own cash that they have.
Latha: Does it fit with the product profile you already have between you and your already acquired companies, so will you be able to sell those products to your already long customer list?
A: Absolutely, I think in this particular space, we were asked to take over this particular asset at the last moment per se and the customer profile is the same. It is a German customer profile, we have some orders from Ford and from GM as well but this product range is absolutely in sync with what we are doing.
Sonia: Can you tell us what the cash on your books are currently and do you have any more acquisitions lined up in the next three-six months that we can look forward to?
A: We had done 500 million euro bond sometime ago and the cash etc is something very dynamic, it is always changing but yes, we still feel that there is one more acquisition which might be on the anvil. But we cannot tell you much more about that.
Latha: Will it be bigger than this one?
A: No, it will be smaller.
Sonia: What geography will it be in, are you looking at Europe itself?
A: It will be in Europe.
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