With this, about 5,000 employees of Larsen and Toubro’s electrical and automation business will be integrated with Schneider Electric’s over 2,000 employees.
New Delhi: Engineering and construction giant Larsen and Toubro on Monday said it has completed the strategic divestment of its electrical and automation business to Schneider Electric. The move will see India becoming the third largest country in terms of revenues for Schneider Electric. With this, about 5,000 employees of Larsen and Toubro’s electrical and automation business will be integrated with Schneider Electric’s over 2,000 employees.
Though the size of the deal was not disclosed, L&T had inked a definitive pact with Schneider Electric in 2018 to sell its electrical and automation business for an all-cash consideration of Rs 14,000 crore, as part of its long-term strategy to exit non-core activities.
“Larsen and Toubro (L&T), India’s leading engineering, technology, construction and financial services conglomerate, today announced the closure of the strategic divestment of its electrical and automation (E&A) business to Schneider Electric, a global player in energy management and automation,” the company said in a statement.
The significant and complex divestment deal, one of its kind in India announced in May 2018, has been completed after receiving the requisite regulatory approvals and fulfilment of necessary conditions, it said.
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, the company said and added that its exit from the E&A Business is a part of the strategic portfolio review process.
Commenting on the closure of this divestment, L&T group chairman A M Naik said: “The closure of divestment of the E&A business is a key milestone in our stated 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.”
Naik said the company believed Schneider Electric is the right partner to grow the business, that L&T had 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,” he said.
Schneider Electric in a separate release said the combined business after completion of this acquisition will come under Schneider Electric India Pvt Ltd (SEIPL), in which is 65 per cent stake is owned by French multinational Schneider Electric, while 35 per cent stake is held by global investment company Temasek.
Schneider Electric also announced the appointment of Anil Chaudhry, the current Zone President and Managing Director of Schneider Electric India, as the CEO SEIPL and Zone President India.
Jean-Pascal Tricoire, chairman and CEO, Schneider Electric, said, “The coming together of Schneider Electric and L&T’s electrical and automation business combines two great teams, highly professional and specialised in the space of energy management and automation, and passionate about technology, innovation, quality, safety, sustainability and social responsibility.”
This newly merged company will serve the priorities of India: Make in India for India and the rest of the world, Digital India, Skill India, Sustainable Energy, Smart Cities and Infrastructure for self-reliance, to bring tremendous value to customers and stakeholders, employees, partners, suppliers, and community in which the company develops, Tricoire said.
“We are also proud to partner with Temasek, who bring along their deep knowledge of India, and their coaching to help develop the export of the company. This major strategic move will make India, Schneider Electric’s third largest business in the world, and one of the four major global Schneider hubs for global R&D, global manufacturing,” he said.
The company will also “keep growing already significant export from our Indian factories”, he said and added “Anil Chaudhry will lead the new entity as its CEO and bring his deep expertise in digitisation and electrification as well as his passion for the cause of digital solutions for efficiency and sustainability”.
S N Subrahmanyan, CEO and MD, Larsen and Toubro said: “This all cash deal will help us create a much stronger balance sheet, thereby creating long-term value opportunities for our stakeholders by focusing 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 adding this is in sync with our strategy to look at L&T in broadly three areas, EPC construction and projects, manufacturing and defence and services.
L&T’s E&A business with its wide range of low and medium voltage switchgear, electrical systems, industrial and building automation solutions, energy management systems, metering solutions and projects and services business are transferred to Schneider Electric.
Schneider Electric will use related brand insignia for a specified period as the brand is very popular and has a strong brand recall in the switchgear market.
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.
L&T, 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 and this deal with Schneider Electric will further strengthen the balance sheet, the company said.
Shardul Amarchand Mangaldas (SAM) Legal Advisors, Ernst & Young (EY) LLP and Arpwood Capital acted as advisors to L&T on this transaction.
Source: PTI
