Italy’s Prysmian to snap up rival Draka in $1.2 bn deal

Italy’s Prysmian to snap up rival Draka in $1.2 bn deal

London: Italian cable manufacturer Prysmian SpA will acquire its Dutch rival Draka Holding NV in a cash and share deal worth $1.2 billion to create one of the world’s largest cable entity with presence in over 50 countries.

Both companies have presence in India. In a joint statement on Monday, Prysmian said it would buyout Draka in a deal valued at €840 million ($1.15 billion), including a cash consideration of €420 million.

Approved by the two companies’ boards, the transaction is expected to close during the second quarter of 2011. As part of deal, Prysmian would issue around 32 million new shares.

The billion-dollar deal comes at a time when the global cable manufacturing industry is grappling with lower demand from Europe and intense competition.

With complementary geographic presence and technological expertise, the combination would create a leading player in the global energy and telecom cable and systems industry.

“The combined group will have operations in more than 50 countries, with a manufacturing footprint of over 90 plants, and a total workforce of more than 20,000 employees," the statement said.

The deal is expected to generate annual cost savings to the tune of €100 million within three years from optimisation of manufacturing activities and procurement of raw materials, among others.

Draka’s CEO Frank Dorjee said that Prysmian’s offer provides an attractive valuation.

“As both companies have an extensive track record in integrating cable assets, the process of combining the two businesses will be smooth," Dorjee noted.

Prysmian anticipates to fund the transaction with available cash, credit lines and issuance of new shares.