Phoenix To Take Over Andrew Yule Unit
The DM 1.5-billion Phoenix AG of Germany, that has entered into a joint venture with Andrew Yule & Co Ltd, has agreed to take over the assets of the belting division of the diversified public sector company at a price of around Rs 49 crore at the prevailing exchange parity rate of DM into INR between Rs 19.5 to Rs 23.
The German partner, with 74 per cent equity participation, has proposed to invest DM 10 over the next five years in the proposed joint venture company, Phoenix Yule Private Ltd (PYPL), of which DM 8 will be invested during the first two years.
The board of directors of Andrew Yule, which has 26 per cent equity participation in the joint venture, have proposed to invest up to a sum of Rs 12.75 crore with the requisite approval from the central government.
In this regard, Andrew Yule will seek shareholders' approval at an EGM.
Chalking out a revised business plan for PYPL for 2000-2001, Phoenix has agreed to absorb all the current employees of the division and provide state-of-the-art technology for textile and steel cord conveyor belts on a continuous basis to the joint venture company at a reasonable royalty without any `lump sum fee', stated the EGM notice.
Phoenix will also enter into a transitional service agreement for certain common services to be provided by Andrew Yule to the joint venture company for a minimum period of 12 months with renewal clause.
The performance of Andrew Yule's belting division, engaged in the manufacture of textile and steel cord conveyor belting, automotive fan and vee belts, suffered during the last few years. This was due to severe working capital constraints, liberalisation of imports, sluggish demand in capital goods and inadequate government investment in core sectors.
Hence, Andrew Yule formulated a long term business restructuring plan including spinning off belting division and formation of separate joint venture company, which had been approved by the central government.
Consequently, Industrial Credit & Investment Corporation of India (ICICI) and I-Sec were appointed as the advisors for the company for selection of joint venture partner for its belting division.
Finally, a memorandum of understanding was signed between Andrew Yule and Phoenix on April 22.
Phoenix, which has been finally selected, is an internationally reputed company, engaged in the business of manufacturing, marketing and selling conveyor belts, hydraulic and other hoses, automotive rubber products and allied items.
The German company has its operations in the UK, France, Hungary, USA, Spain, Belgium and other countries and is keen to expand its business activities in the Asian region.