L&T has divested its Electrical & Automation Business to Schneider Electric for an all-cash consideration of ₹14,000 crore.
The deal, which was announced in May 2018, was a complex one and the regulatory approvals have finally come through. The deal is also expected to add to its operating cash flow and offers management enough cash surplus to reward shareholders.
AM Naik, Group Chairman, Larsen & Toubro, said: “The challenge was to carve out a business of this scale, with minimum disruption to the sprawling customer base and do it all amid the constraints of a pandemic. We believe Schneider Electric is the right partner to grow the business that L&T has nurtured and grown over decades. We truly believe that this deal with Schneider Electric is a win-win for our employees, business partners, and shareholders.”
SN Subrahmanyan, CEO & MD, Larsen & Toubro, said that this all-cash deal helps the company create a much stronger balance sheet, thereby creating long-term value opportunities for our stakeholders by focussing on key aspects of business. “The deal was a complex M&A transaction involving slump sale of the domestic business and share purchase transfer,” he said.
This is a part of L&T’s efforts to focus on three areas, EPC Construction & Projects, Manufacturing & Defence and Services. Over the past five years, in line with its strategy to focus on the EPC and Services business, has exited several businesses. The recent divestment of its stake in ports, insurance, road concessions and other businesses have all unlocked value.
The divestment is in line with L&T’s stated goal of unlocking value for future growth. L&T continuously evaluates its business portfolio and takes capital allocation decisions from a long-term perspective. Its exit from the Electrical & Automation Business is a part of the strategic portfolio review process, the company said.
As a part of the deal, around 5,000 employees of the E&A business will become part of Schneider Electric. The manufacturing facilities of E&A in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru in India and related subsidiaries in UAE, Kuwait, Malaysia and Indonesia are also being transferred to Schneider Electric. In view of the pending local approvals, the subsidiary in Saudi Arabia, L&T Electrical & Automation Saudi Arabia Company Limited (LTEASA), will be transferred to Schneider, once the requisite regulatory approvals are in place, the company said. In Q1, Shankar Raman, CFO, L&T, had said that the deal will be concluded in FY 2020-21.
Shardul Amarchand Mangaldas (SAM) were legal advisors, Ernst & Young (EY) LLP and Arpwood Capital acted as advisors to L&T on this transaction. The announcement was made after market hours and L&T shares closed at ₹945, down 3.72 per cent from the previous day’s close.
About Schneider Electric
Schneider Electric is leading the Digital Transformation of Energy Management and Automation in Homes, Buildings, Data Centers, Infrastructure and Industries. With global presence in over 100 countries, Schneider is the undisputable leader in Power Management – Medium Voltage, Low Voltage and Secure Power, and in Automation Systems. We provide integrated efficiency solutions, combining energy, automation and software. In our global Ecosystem, we collaborate with the largest Partner, Integrator and Developer Community on our Open Platform to deliver real-time control and operational efficiency. We believe that great people and partners make Schneider a great company and that our commitment to Innovation, Diversity and Sustainability ensures that Life Is On everywhere, for everyone and at every moment.
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