Larsen and Toubro Ltd. has sold its electrical and automation unit to Schneider Electric SE as it pares the number of business lines that it operates.
The sale—an all-cash deal amounting to nearly Rs 14,000 crore—was announced in May 2018. It followed a strategic portfolio review and aims to unlock value for future growth, India's largest construction and engineering group said in a statement on Tuesday.
The unit makes voltage switchgear, energy management systems, industrial automation systems and metering solutions, among other products. Schneider Electric will now use related brand insignia for a specified period owing to their popularity and brand recall in the switchgear market, the statement said.
AM Naik, group chairman of Larsen & Toubro, termed the deal a “milestone in the company's long-term strategy”. “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,” he was quoted as saying in the statement.
About 5,000 employees of the electrical and automation business will become a part of Schneider Electric along with transfer of manufacturing facilities in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru in India and subsidiaries in the UAE, Kuwait, Malaysia and Indonesia. The electrical and automation business of L&T in Saudi Arabia will be transferred once Schneider Group secures regulatory approval.
The deal, according to L&T's Chief Executive Officer SN Subrahmanyan, would help strengthen the company's balance sheet and create long-term value for stakeholders. “The deal was a complex M&A transaction involving slump sale of the domestic business and share purchase transfer,” he said. “This is in sync with our strategy to look at L&T in broadly three areas, EPC Construction and Projects, Manufacturing & Defence and Services.”
Shares of L&T have fallen by nearly 27.21% so far this year, while the Nifty 50 Index has declined by 6.4%.
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