"The acquisition will make us one of the top power transformer and distribution transformer companies in the world," said SM Trehan, managing director, Crompton Greaves.
The Pauwels Group is a closely held company and Crompton Greaves will acquire 100 per cent of its equity. The acquisition will give Crompton manufacturing facilities in Belgium, Ireland, the US, Canada and Indonesia, and access to its sales offices at 20 locations.
The company had reported a loss of Euro1.6 million on a turnover of Euro 260 million in 2004. According to Trehan, the company had been put on the block by the promoters because of the losses.
Crompton was one of the bidders. The company had then signed an exclusivity agreement, which barred the Pauwels Group from talking to other bidders till February 28.
"We have signed a memorandum of understanding and will conclude the deal in about a month," Trehan added.
Crompton Greaves will fund the acquisition by internal accruals and debt in equal proportion. The company is already in talks with International Finance Corporation and other institutions for raising debt.
"The cost of production and designing is cheaper in India so we will use this as the main base. This acquisition will help bring in greater intellectual capabilities for better designs," he said.
"At present, we have capabilities for producing 400 KV transmitters and we can now upgrade to 500 KV transmitters, which are required globally," he added.
Crompton Greaves will also use the Pauwels brand in India and enhance the non-core activities of the group like contracting.
"We aim to maintain the process ousourcing business of the Pauwels group as it contributes 10 per cent of the company's turnover," Trehan said.
In the financial year ended March 2005, Crompton Greaves posted a net profit of Rs 71 crore (Rs 710 million) on a turnover of Rs 1,861 crore (Rs 18.61 billion).
