M & A CritiqueALLIANCE INTEGRATED METALIKS LIMITED:
The company started as a financing company in the name of “BS Holding and Credit Private limited” in the year 1989 based in New Delhi. In the year 1996 it was converted into a limited company with the name BS Holding and Credit Private limited” and in the year 2004, it changed the name to Alliance Integrated Metaliks Limited with the change in the business line of the company. Now, the company has the state of the art facility for fabrication of power plant structures and auxiliary equipment for power plants. The facility is the largest automated facility for power plant structures and equipment’s in North India. As AIML is into the metal fabrication industry, the main function of the Metal Fabrication Industry is to produce component metal parts that will fit in along with other parts, to form larger machinery.
AMTEK AUTO GROUP:
Amtek Auto group is one of the largest integrated auto components in India. Amtek Auto has 43 manufacturing facilities with the majority being in India (39) and also across Europe (4). Amtek, which ranks second behind Bharat Forge in the production of forgings, is a major supplier to local and global automakers, including Maruti, Tata Motors, Hero MotoCorp, General Motors, Ford and BMW.
Amtek group is taking the advantage of the economic slowdown in Europe by bidding for cheap assets
AMTEK RING GEARS LIMITED
Amtek Ring Gears was incorporated in the year 1995, as a private limited company under the name “Benda Amtek Private Limited”. In the year 1995, it was converted into a limited company with the name “Benda Amtek Limited”. Its name was again changed from “Benda Amtek Limited” to “Amtek Ring Gears Limited” with effect from 2007. As of now the company is engaged in the manufacture of high precision engineering automotive components mainly flywheel ring gears, assemblies for application to cars, two-wheelers, LCV, HCV, and stationary engines. It’s flywheel ring gears production is amongst the largest in India and is also an OEM supplier to world known Brands
AMTEK CRANKSHAFT LIMITED
Crankshafts were initially incorporated as Amtek Engine Components Limited in the year 1997. Later on, its name was changed to Amtek Siccardi (India) Limited in the year 1998. Its name was further changed to Amtrak Crank Shaft (India) Limited. Finally, its name was changed to its present name i.e. Amtek Crankshafts (India) Limited in the year 2007. It is engaged in manufacturing of high precision engineering automotive components, mainly crankshafts for application to two-wheelers, tractors, LCV, HCV, passenger cars and stationary engines. Crankshafts are the largest manufacturer of crankshaft assemblies in Northern India and are also an OEM supplier to world known brands.
INDUSTRY REVIEW:
So the metal fabrication Industry proves to be an essential section of the entire global metal industry as it produces minute spare parts of larger heavy machinery and equipment s, which cannot be manufactured simultaneously with the manufacturing of the heavy machines.
The Indian economy continues to surge ahead; its power sector has been expanding concurrently to support the growth rate. The demand for power is growing exponentially and the scope for the growth of this sector is immense. Ever since the power sector was opened up for private investments, there has been a huge surge in Indian and Foreign Companies showing interest in this field.
With power producing companies bagging more and more projects and their building capacities and capabilities, there is a huge scope of outsourcing of various equipment’s and auxiliaries which have to be supported by Indian private manufacturing establishments. This translates into a huge opportunity not only for power generation, transmission and distribution companies but also for power ancillary companies.
TRANSACTION:
Amtek sale of 51% equity stake of total paid up equity share capital of Amtek Ring Gears Limited and Amtek Crankshafts (India) Limited to Alliance Integrated Metaliks Ltd. Consequently to this, AMTEK ceases to be the holding company and Alliance Integrated Metaliks Limited has become the Holding Company of ARGL limited and ACIL Limited.
PRODUCT DIVERSIFICATION:
The AIML as of now was mainly in power plant structure but with the acquisition of these companies, it has diversified product and this will benefits the company to fight back in the slowdown in any of the sector.
CHANGING PHASE OF THE AMTEK AUTO:
In January 2013, Amtek sold 5% in Amtek Crankshafts (India) which was followed by another 5% divestment in its subsidiary Amtek Ring Gears, both being sold to foreign investors. The group has gone for majority stake (i.e. 51 %) sale of both the companies to the alliance and in continues row the company is also acquired the Germany-based Neumayer Tekfor Group. After the acquisition of the NeuMayerTekfor group, it would be one of the world’s largest global forging and integrated machining companies with a consolidated capacity of 1 million tonne per year and this will also add 9 manufacturing units across Germany, Italy, U.S.A, Mexico and Brazil. This acquisition will help to expand the branches of the group into more foreign territories which would definitely enhance technology wise. The group is also taking the advantage of the economic slowdown in Europe by bidding for cheap assets.
VALUATION:
The Amtek Group acquired the Amtek Crankshafts Limited (i.e. 100% Equity Stake) and Amtek Ring Gears limited (i.e. 89.41% Equity Stake) at Rs. 81.32cr and 64.55cr respectively. Now the stake sell value is not disclosed by both the parties including the buyer. But the exit by Amtek group look good from the value the Amtek sold 5% stake in Amtek Crankshafts (India) for Rs. 22.38 Cr and 5% in Amtek Ring Gears for Rs. 20.4 Cr.
There are major acquisitions by the Indian Auto component maker in the past few years but for an undisclosed amount. So technically we are not able to evaluate whether it is best deals for the seller or not in the market terms. But with the amount invested by the Amtek in 2007 in this subsidiaries and amount that would be realized according to our evaluation as above seems to be a good deal.
CONCLUSION:
The time of investment and the time of realization, in value creation for the investors are handled almost perfectly by the management of the Amtek Group. The partial exit from both companies and the investment by the group in the German-based company show that the group does not want to leave the old investment but wants to expand in the new geographical areas as and when opportunities knock the door. Here the management has to change the focus from financial investors to strategic investors and also to curtail the highly leveraged balance sheet.
