If deal talks fructify, the Quadria Capital stake buy would be the third transaction in the niche & active segment. [Representative image: ShutterStock]
The Shapoorji Pallonji Group has shortlisted three suitors for the big-bang sale process of its consumer durable flagship Eureka Forbes, a household name in the vacuum cleaner and water purifier segments, people with knowledge of the matter told Moneycontrol.
The 150-year-old diversified conglomerate that has interests in sectors ranging from construction and real estate to power and biotechnology is looking to ride the health , hygiene and home improvement wave on the back of Covid-19 , these sources added. Eureka Forbes is a subsidiary of listed parent company Forbes & Company.
“ Currently, it’s a three-way race between private equity firms Advent International , Warburg Pincus and Swedish home appliance maker Electrolux. These players have been shortlisted for this high-profile deal and they are conducting due diligence ,” said one of the persons cited above.
The Shapoorji Pallonji group is looking to unlock value and also reduce its debt burden through the proposed transaction, this individual added. An internal restructuring exercise, involving a demerger of Eureka Forbes from Forbes & Company is also being pursued simultaneously, he elaborated. Demerger procedures are taken up for approvals at the NCLT ( National Company Law Tribunal) .
“ Standard Chartered Bank has been mandated to find a suitable buyer and binding bids are expected to be submitted after a few weeks. The SP group is expecting premium valuations in the range of Rs 6,500 crores to Rs 7,000 crores. In case of differences over valuation, a deal may be struck in the region of Rs 5,000 crores to Rs 6,000 crore,’ a second person, an industry executive, told Moneycontrol.
Moneycontrol was the first to report the sale plans on November 20th, 2019 .
Read:Exclusive | Shapoorji Pallonji Group kick-starts sale process for Eureka Forbes; top PE funds in fray
“The strong brand recall, the popular Aquaguard range, extensive pan India distribution network and after sales service are key factors which will attract both strategic as well as private equity suitors willing to cut the right cheque size. Eureka Forbes can be a plug and play option for some suitors and one can easily bolt on other products on the same network,” a third individual told Moneycontrol.
A fourth person said Eureka Forbes is also present in segments such as purifiers, security solutions and accessories. "Recently, it launched Forbes Coronaguard, a virus disinfectant device as well as robotic vacuum cleaners. Since, the firm covers several pin codes in India, it has a massive consumer insight database which is also valuable for a potential buyer,” this person said.
All the four persons spoke to Moneycontrol on the condition of anonymity.
Moneycontrol is awaiting an email response from Forbes & Co , the Shapoorji Pallonji Group and Warburg Pincus and will update this article as soon as we hear from them. Electrolux declined to comment on “rumours or speculation. Advent International declined to comment. Standard Chartered Bank declined to comment as well.
Back in November 2019, Forbes and Company had made the following disclosure to the stock exchanges: “The Company has been frequently queried by various stakeholders including by shareholders of the Company regarding future plans relating to unlocking value of Eureka Forbes Limited. Currently, Eureka Forbes Limited is a 100% subsidiary of the Company.
The Board of Directors of the Company have authorized the management of the company to evaluate a scheme of arrangement and/or other appropriate mechanisms to enable an eventual listing of Eureka Forbes Limited, with an intention to unlock value in the hands of all the shareholders of the Company. These may also include listing, dilution/sale or combination thereof of Eureka Forbes Limited.”
EUREKA FORBES: A NOSTALGIA BET FOR ELECTROLUX?
Electrolux is present in multiple product ranges in the kitchen, laundry and filters and accessories segments ranging from microwave , dishwashers, refrigerators and wall ovens to washing machine and dryers and water and air filters and dishwasher/compactor accessories. It sells approximately 60 million household products in approximately 120 markets every year. In 2020 Electrolux had sales of $ 14 billion and employed 48,000 people around the world.
Interestingly, Eureka Forbes was set up in 1982 as a joint venture between Forbes & Co & Electrolux, one of the suitors in the race today. Post the sale of Forbes & Co to the SP Group in 2001, the latter purchased the 40 per cent stake of Electrolux in the joint venture. According to reports, Electrolux had exited back then as it had already got out of the direct marketing business globally.
According to its website, Advent’s consumer portfolio in India includes DFM Foods, men’s inner wear brand Dixcy Textiles and Crompton Greaves Consumer Electricals. On the other hand, the India consumer portfolio of Warburg Pincus includes Biba Apparels, Boat, listed firm Kalyan Jewellers, IPO bound Medplus and PVR.
A CLOSER LOOK AT EUREKA FORBES
As per its website, Eureka Forbes has Asia's largest direct sales task force, a base of 20 million customers and a reach of over 450 cities and towns in India with a global footprint in 53 countries. The firm has a consumer channel of over 18,000 dealers, an institutional channel Forbes Pro Solutions that has water projects, cleaning solutions and railways divisions as well as an inventive business partner network and a rural channel.
It has extended its presence overseas via a joint venture with Lux International, Switzerland, the website says. Other than Aquaguard, the firm has other brands like AquaSure, Euroclean, Euro-Air, Eurovigil, Fireguard and Eurodiya ( solar bulbs).
According to reports, Eureka Forbes posted revenues of Rs 2,388 crores in fiscal 2019. It has manufacturing units at three locations -- Bengaluru, Dehradun and Baddi -- with a manufacturing capacity of around 12 to 15 lakh units per annum.