Sona Autocomp Holdings Limited enters into an agreement to sell its entire stake in Sona Koyo Steering Systems Limited to JTEKT Corporation
Sona Autocomp Holding Limited, led by Mr. Sunjay J Kapur, today, has entered into an agreement, with its long standing technical and financial collaborator JTEKT Corporation, to sell its entire stake in Sona Koyo Steering Systems Limited (“SKSSL”). The total consideration would aggregate to INR 4,192.83 million at a price of INR 84.00 per share for 49,914,664 shares representing 25.12% stake in SKSSL.
SKSSL is a manufacturer of steering systems for passenger cars and utility vehicles in India. The Company supplies steering assemblies to Maruti Suzuki and several global automakers, including Toyota, Tata Motors, Mahindra & Mahindra, Honda, Renault Nissan and Ford.
The deal values SKSSL at an enterprise value of INR 19,225 million and represents a 10.1x multiple of SKSSL’s EBITDA for the last 12 months ended September 30, 2016. The share price of INR 84.00 per share represents a premium of ~ 34% to the average closing price of SKSSL’s shares for last three months.
The transaction is subject to regulatory clearances by Competition Commission of India and certain other conditions mentioned in the agreement. JTEKT Corporation has also made a public announcement to acquire an additional 51,672,877 shares through an open offer, representing an additional 26% of Sona Koyo’s existing share capital, at a price of INR 84.00 per share aggregating to INR 4,340.52 million from the public shareholders of Sona Koyo. Subject to receipt of approvals and completion of conditions mentioned in the agreement, the transaction is expected to close by the first quarter of the financial year 2017-18.
On completion of the transaction described above and in the event that the open offer is fully subscribed JTEKT Corporation would have increased its stake to 71.22% in the Company from the current 20.10%. Mr. Sunjay J Kapur and Sona Group nominee directors, Mrs Rani Kapur and Mr Kiran Deshmukh, will step down from the Board of SKSSL upon closure of the transaction.
This is the first strategic transaction announced by the Sona Group under the leadership of Mr. Sunjay J Kapur who took over the reins of the 5,000 crore Sona Group after the sudden demise of its founder Dr Surinder Kapur in 2015. In the past few months the Group has announced several plans such as customer acquisitions in the electric vehicles space and opening of new facilities to strengthen the manufacturing capabilities of Sona BLW Precision Forgings Limited, the other significant group company.
Mr. Sunjay Kapur said “We are delighted to complete a win-win deal for all parties - Sona, JTEKT, our customers and our employees. We are particularly happy that Sona Koyo Steering Systems Limited, set up by our founder, the late Dr Surinder Kapur, will now become a part of the largest steering system company in the world. We truly believe that JTEKT has great plans to integrate our plants and employees into their global network, and bring global scale to our company. This transaction is a step in a transformational phase in Sona's journey and now it allows us to focus our attention, investments and energies in our fast growing Precision Forging business where we own the technology and have the potential to claim global market leadership.”
The transaction will also result in a partial exit for JM Financial Private Equity Fund, which made an investment in Sona Autocomp Holding Limited in 2007. Commenting on the transaction, Mr Vishal Kampani, MD of JM Financial Limited said “We have had a long and fruitful partnership with the Sona Group since 2007 and have witnessed the group conquer greater heights initially under the leadership of Late Dr Surinder Kapur and now under Mr Sunjay Kapur. We believe that this transaction is a positive development for all stakeholders and will help Sona Group further strengthen its market leadership position in the Precision Forging business”
JM Financial Institutional Securities Limited acted as the sole financial advisor and Cyril Amarchand Mangaldas acted as the sole legal advisor to Sona Autocomp Holding Limited on this Transaction.
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