Auto component major Motherson Sumi Systems could be eyeing the starter motors and generators division of global giant Bosch LLC through a likely USD 600-million bid, a report in the Economic Times said today.
The company is said to be in discussion with banks to evaluate financing options for the bid.
In an interview with CNBC-TV18, Vivek Chaand Sehgal, Chairman of Motherson, did not deny the news, saying: "We don’t comment on things which are not fully done."
The ET report suggests Motherson could use its European arm to conclude the acquisition and might look to win binding contract for Bosch’s customers. Morgan Stanley is said to be an advisor for the deal. India is the only country where Bosch shares are publicly traded.
Bosch, which is a Euro 70-billion group and operates through 450 subsidiaries in more than 60 countries, had in 2015 spun off the USD 1 billion plus generators and starter motors division. It had also talked about finding a partner or buyer.
The division is a leading supplier of generators and starter motors for passenger and commercial vehicles in Europe, the US, China, India and South America.
If the deal goes through, it will be the fifteenth acquisition for Motherson in the last fifteen years.
Sehgal also talked about the recently-concluded acquisition of Finland's PKC Group, which was sealed on January 21. The Rs 4,000-crore acquisition gave Motherson the much-sought expansion in the US market.
PKC is a profit-making company and brings huge synergy in terms of the wiring harness business and opportunities to cross-sell other products like dashboards, cockpits, among others, he said. PKC is in markets where Motherson is either not present or lacks a strong foothold, so the acquisition will create value, he added.
Motherson’s 5-year plan is to be a USD 18-billion company by 2020 with 40 percent growth rate in return on capital employed and the company is open to achieve it through organic growth as well as acquisitions, if needed, he said.
Below is the verbatim transcript of the interview with CNBC-TV18
Sonia: The market is now talking about another big acquisition from you, the possibility of you making a bid, USD 600 million bid for one of Bosch’s arms in the Tata Motors division. Is that correct?
A: We don’t comment on things which are not fully done. So, we really would want to talk more about PKC. Our response is there to that particular news item, so, we have no issues on that. Whenever it will happen, we will come back to you and tell you that it is happening or something like that. We don’t comment on speculation.
Anuj: You have a track record of turning around acquired companies, how will the new acquisition of PKC add to the parent company? Will it be EPS accretive from the first year itself?
A: Absolutely, you are right. PKC is existing profit making company and we feel that there is a huge amount of synergy between Motherson’s wiring harness business and PKCs wiring harness business. It opens up huge market for us, it allows us to cross sell our other products like cockpits, dashboards, and all these particular things to all these new customers. So, we are very excited by it.
In the wiring harness Motherson, it is like our backyard, that is where we have been born, brought up, and that is our specialty area. So, we think that there is going to be huge amount of value created by both of us coming together. We have a lot to learn from them, they have a lot to learn from us so I think together we will make it a brilliant company. They are also in those markets where we are not present, or we are not so powerful over there. So, I think that allows us not to destroy value and hence it will be very accretive for all the investors in Motherson.
Sonia: You are already sitting on a very high base as far as revenue growth is concerned, but there are still analysts who expect about a 25 percent EPS compounded growth over the next three years, is that a possibility?
A: If they say it, definitely we have to try and make sure that we come better than their expectations.
Anuj: Can the topline grow at 15 percent plus CAGR over a four year period, over FY16 to FY19?
A: Our five-year plan is very clear. Motherson Sumi Systems is going to be a USD 18 billion company by 2020 at 40 percent growth. Our focus is always topline matched with the bottomline with cash in the bank. So, we are very clear that we are open to all acquisitions, growth avenues, either doing it by ourselves or through joint ventures or through acquisitions. So, we are there to support our customer; if our customer tells us do anything, we don’t hesitate at all.
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