L&T sells its electrical and automation business to Schneider Electric for ₹14,000 crore3 min read . Updated: 31 Aug 2020, 08:41 PM IST
The deal had been initially announced in May 2018 and is now complete after receiving the requisite regulatory approvals and fulfillment of necessary conditions
Mumbai: Larsen & Toubro (L&T has announced the closure of the strategic divestment of its Electrical and Automation (L&T E&A) business to Schneider Electric, a global player in energy management and automation, for ₹14,000 crore in an all-cash deal. The company said it will use the proceeds to capital allocation decisions from a long-term perspective
The deal had been initially announced in May 2018 and is now complete after receiving the requisite regulatory approvals and fulfilment of necessary conditions. L&T has said that its exit from the electrical and automation business is a part of the strategic portfolio review process.
“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," AM Naik, Group Chairman, Larsen & Toubro said. “We believe 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."
“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," SN Subrahmanyan, CEO & MD, Larsen & Toubro, said. “The deal was a complex M&A transaction involving slump sale of the domestic business and share purchase transfer. This is in sync with our strategy to look at L&T in broadly three areas, EPC Construction & Projects, Manufacturing & Defence and Services."
L&T’s E&A business had a range of low and medium voltage switchgear, electrical systems, industrial and building automation solutions, energy management systems, metering solutions and projects and services business that are now 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.
About 5,000 employees of the E&A business will become part of Schneider now. 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.
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 in a press release.
In a separate press release, Schneider Electric said it would combine L&T’s electrical and automation business with Schneider Electric India’s Low Voltage and Industrial Automation Product business. The combined business – Schneider Electric India Private Limited (SEIPL) will be owned 65% by Schneider Electric while global investment company Temasek owns the remaining stake. SEIPL also announced the appointment of Anil Chaudhry – the current Zone President & Managing Director, of Schneider Electric India – as the CEO SEIPL and Zone President India. SEIPL will go to market with its two distinct portfolio brands, L&T’s Electrical & Automation business and Schneider Electric, along with separate sales teams and partner networks.
Jean-Pascal Tricoire, Chairman & CEO, Schneider Electric, said: “The coming together of Schneider Electric and L&T’s Electrical & 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 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. We shall also keep growing our already significant export from our Indian factories."