Crompton makes $400-mn bid for Emerson's transformer business

In what could be its biggest acquisition, power equipment maker Crompton Greaves has offered $400 million (Rs 1,860 crore) for the transformer division of the US-based Emerson Electric Company, three investment bankers familiar with the development told Business Standard.

Missouri-based Emerson Electric is a diversified global technology company with a $37.3 billion market capitalisation. Its industrial automation business has a division for power transmission solutions, which it wants to divest. Crompton Greaves is one of the companies that have made a bid for this division. The names of the other bidders could not be ascertained.

“Emerson Electric wants to concentrate on control automation, which is the mainstay for industrial automation business,” said one of the investment bankers. “The acquisition will help Crompton Greaves strengthen its position in the US market,” he said.

The company did not respond to an email sent on Friday. Calls made and text messages sent to the company’s Managing Director S M Trehan did not get any response.

If the bid is successful, this would be Crompton’s second acquisition in the US. The company had earlier acquired MSE Power System for $16 million (Rs 72 crore) in 2008. In June this year, it also completed its new transformer manufacturing facility in Washington, Missouri, in the US, with an investment of $20 million.

Crompton had made a net profit of Rs 860 crore in the financial year ended March. Its net sale for the year was Rs 9,140 crore. The company had Rs 500 crore of debt on its books as on March 31 against equity of Rs 2,500 crore. It also had Rs 669 crore cash on its books. This means the company may have to raise about Rs1,200 crore in debt for the acquisition.

“The company has taken a line of credit for the acquisition from some domestic banks,” said one of three investment bankers mentioned earlier. He did not disclose the name of the domestic bank. Global investment bank Merrill Lynch is advising Crompton Greaves on the deal.

Crompton Greaves went on an acquisition spree starting 2005, when it bought Belgium-based transformer maker Pauwels for Rs 195 crore. The following year, it acquired a Hungarian company Ganz for Rs 200 crore. In 2007, Crompton acquired Ireland’s Microsol. This acquisition provided Crompton the capability to build and service sub-stations with state of the art automation and high-end engineering. In 2008, it acquired French company Sonomatra, which provides on-site maintenance and repair of power transformers. In the same year, Crompton also acquired the US-based MSE Power System for Rs 72 crore. Crompton’s latest acquisition was in March this year, when it bought UK-based electrical engineering company Power Technology Solutions for around Rs 200 crore.