Matsushita acquires control of India's Anchor Electricals

The Japanese electrics company pays $421 million to acquire control of IndiaÆs Anchor Electricals helping it to gain a strong foothold in a new Asian market.
Matsushita Electric Works of Japan is to buy 80% of Indian electrical construction materials company, Anchor Electricals, for Ñ50 billion ($421 million). The current owners of Anchor, the Shah family, will own the remaining 20% and will continue to participate in the management of the company. The move allows Matsushita to establish a strong foothold in a fast-growing country where it did not have a presence.

Construction-related businesses currently account for 70% of MatsushitaÆs total sales. In order to grow these businesses further, the company has identified overseas expansion as a top priority. It wants to grow the contribution of non-Japan sales by 50% from around Ñ222 billion in 2006 to Ñ320 billion by 2010. Matsushita is already present in China, Taiwan, Korea and some other Asian economies, thus the move into India gives it a presence across its primary target markets on the continent.

Through the acquisition, Matsushita is gaining control of a strong brand, a well-entrenched distribution network and about 20 manufacturing facilities spread across India.

Anchor has a history of over four decades in wiring devices including switches and outlets. Today its product portfolio includes lighting fixtures, ventilators, ceiling fans and electric wires. It is the largest electrical construction materials company in India with a market share estimated at more than 50%.

Financial details for Anchor, which is closely held by the Shah family, were not disclosed but analysts say the company clocked a turnover of Rs9.22 billion ($221 milion) for the last fiscal year on which it earned a profit of Rs1.87 billion. This suggests Matsushita has valued Anchor, on a equity value basis, at about 2.8 times revenue and about 12 times profit.

India is witnessing an unprecedented construction boom. Access to home loans coupled with rising income levels have combined to create a large pool of buyers. At the upper income segments, the wealthy are willing to spend lavishly on their homes. Simultaneously, the country is investing heavily in strengthening infrastructure in the country including electricity. Against this backdrop, AnchorÆs businesses seem set to continue to grow strongly hence the rich pricing the owners have been able to command for the sale of a controlling interest.

Others companies that were looking to buy Anchor include Schneider (France), Siemens (Germany) and private equity firms.

Matsushita was advised by Lazard. Anchor was advised by Kotak Investment Banking.
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