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Mr Baba Kalyani, CMD, Bharat Forge

Mumbai , Nov. 22

THE emergent theme of overseas acquisitions by Indian auto and auto component units received further fillip on Saturday, with the Rs 689.2-crore Bharat Forge Ltd (BFL) disclosing its acquisition of Carl Dan Peddinghaus GmbH (CDP).

With CDP alongside, BFL, which is Asia's largest at a forging capacity of 130,000 tonnes, becomes the world's second biggest forging company, after Thyssen Krupp. The asset purchase deal — 100 per cent acquisition of CDP's fixed assets, inventory and business through a special purpose vehicle (SPV), effective January 1, 2004 — will be funded mostly from internal accruals.

The cost of acquisition was not officially announced. When contacted in Europe, Mr Amit Kalyani, Chief Technology Officer, BFL, declined to reveal the price citing confidentiality clauses. The details of the SPV are also being worked out.

CDP is among the largest forging companies in Germany. "This acquisition will help BFL strengthen and expand its business in Europe through the addition of prestigious new customers and build new business with existing customers through deeper relationships and enhanced technology capability. This is especially true in the case of the passenger car segment where CDP has a large presence," said Mr Baba Kalyani, Chairman & Managing Director, BFL, in an official statement.

Reports from Kolkata on September 25, had quoted Mr Kalyani as saying that BFL was doing due diligence at three plants for its European foray and the amount needed for acquisition varied from $15 million to $100 million.

As per BFL's statement, CDP, headquartered at Ennepetal near Dusseldorf with a second facility in Duan and employee strength of 790, is a profitable enterprise and recorded sales of 116 million euros (Rs 629.76 crore at Friday's exchange rate of Rs 54.29 to the euro) for the year ended December 31, 2002. It is a major supplier of critical chassis components to the likes of BMW, Volkswagen, Audi, DaimlerChrysler and Volvo.

Though little background material was available, the Web site of the Peddinghaus Group said, "Due to imminent illiquidity, the company management of Carl Dan Peddinghaus GmbH & Co KG has filed for insolvency of its assets at the local court in Hagen on October 10, 2002. Dr Andres has been ordered as the insolvency administrator for the management of proceedings."

The deal was signed by Mr Kalyani and Dr Andres on behalf of CDP. An equity analyst tracking BFL said an asset purchase deal typically brings home the targeted facility but keeps out any debt component that may have caused insolvency pressures in the first place. "There is no debt coming aboard," Mr Amit Kalyani confirmed.

Sources in the Indian auto component sector saw BFL's acquisition of CDP as a fine move for accessing the European market. "Cost efficiencies lay this side of the world, but German auto manufacturers for instance rarely move outside their captive vendor base to source components. BFL gets to break into that circle with this deal," one of them said, noting further the names of car manufacturers in CDP's clientele.

BFL's acquisition is, therefore, viewed in the same context as last month's news of Amtek Auto being close to buying the £120-million (Rs 933 crore) GWK group, Britain's largest independently-owned auto component company. That was reported in the media as a likely all-cash deal of around Rs 170 crore.

BFL's fiscal year 2003 export income amounted to Rs 271.4 crore, equal to 39.3 cent of its turnover. Europe accounts for about 15 per cent of BFL's exports, Mr Amit Kalyani said.

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