Motherson Sumi Systems shares surged on news that the company is all set to buy Finland-based truck wire maker PKC Group for about $609 million to expand its product portfolio and market presence.
“PKC shareholders are being offered a cash consideration of EUR 23.55 for each share/options in PKC representing an aggregate equity purchase price of approximately EUR 571 million in an open tender offer,” Motherson Sumi said in a statement.
The Indian auto-component maker and engineering company expects the transaction to be complete by March.
Motherson Sumi shares were trading up 3.65% at Rs 337.55, after rising to a high of Rs 338.5 on NSE.
Motherson Sumi said that the acquisition will help expand its presence into new market without overlapping with its current offerings. “The proposed acquisition of PKC supports MSSL in expanding its presence in the niche market of global wiring harness business for commercial vehicles,” Motherson Sumi said, adding, “The combination is expected to be highly value accretive as there is minimal overlap between their existing operations in terms of geographical presence and great synergies in product segments which will unlock the true potential of the combined entity.”
PKC has a market leading presence in the wiring harnesses for commercial vehicles in the North America and Europe markets. Apart from these geographies, PKC has a significant presence in Brazil and, a growing presence in China. PKC had over 22,000 employees and estimated revenue of approximately EUR 846 million for the year 2016.
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Motherson Sumi makes specialised automotive components for OEMs (original equipment manufacturers).
MSSL has appointed Motilal Oswal Investment Advisors Pvt. Ltd and Nordea Corporate & Investment Banking as financial advisers and White & Case as legal adviser for the transaction.
Motherson Sumi further said that it is offering good valuations to the shareholders of PKC Group. The premium is justified since to set up a company like PKC would take 10-15 years, it said.
The acquisition is in line with the company’s 2020 growth target strategy.
“While supporting PKC to accomplish its expansion opportunities, the combined entity will further invest in new technologies which would be required to maintain market leadership and in achieving its goal as the preferred solutions provider for the global automotive industry,” it said.