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Mumbai-headquartered CG Power and Industrial Solutions, manufacturer of power and distribution transformers and a part of Avantha Group, is selling its US business to Brazilian firm WEG at an enterprise value of $37 million.
CG, formerly known as Crompton Greaves (CG), has accepted a binding offer of WEG, a large manufacturer of energy equipment and electric components, to acquire its US-based step-down subsidiary CG Power USA, which is primarily a transformer manufacturer.
A stock purchase agreement for sale of its 100 per cent stake in the US company was executed on June 20 by CG Power Systems Belgium, another overseas subsidiary of CG, the company said in a regulatory filing on Wednesday. The deal is expected to be closed by July 31.
CG Power USA, along with facilities in Belgium, Ireland, Canada and Indonesia, was a part of Pauwels Group that CG acquired in 2005 at an enterprise value of €32.10 million.
The deal is part of CG’s strategy of reducing debt by selling its businesses abroad (except in Indonesia) as the company intends to focus on its core operations and core market in India.
When contacted, an Avantha Group spokesperson declined to comment either on the deal or on the company’s further divestment program.
Commenting on the deal then, KN Neelkant, Avantha Group Company CG’s CEO and Managing Director, said for CG, this was a significant strategic action intended to meet its objective of debt reduction, strengthening balance sheet and building a financially stronger company.
“The divestment is also a step towards our strategy to focus on our core products and markets that provide a significant growth opportunity with improved profitability,” he added then.
CG’s Q4 standalone revenue was at ₹704 crore, while the full 2017 financial year revenue stood at ₹2,684 crore, up 10 per cent from the previous year.
In the Indian market, the company has seen a 14 per cent order book growth from ₹4,359 crore in FY-16 to ₹4,981 crore in FY-17 as well as 12.5 per cent sales growth.
The company’s overseas businesses debt was valued at around ₹1,600 crore before the company started disposing off its overseas assets.
According to the company’s latest interaction with analysts, CG Power had to raise debt in India to settle overseas debt and finance overseas losses.
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