In a deal that says a lot about the changing balance of power in global manufacturing, French giant, Schneider Electric has entered into a delayed takeover for Clipsal Industries's Asian manufacturing capability.
The French multinational is interested in Clipsal's Asian footprint, both for growth reasons and also as a place to lower its own cost of manufacturing. It will merge its electrical wiring business with that of Clipsal, which has been listed in Singapore since 1992, and is part of the Gold Peak batteries empire.
The transaction will see Scheider pay Gold Peak $45.1 million in cash and give it a 50% stake in the new joint venture which will combine both the European's and Clipsal's Asian electrical wiring business, and allow both to benefit from Schneider's industrial circuit breaker business in the region. The deal is valued at $102.4 million and will create a new entity called Clipsal Asia. The price being paid represents a 20% premium to book value.
Clipsal has manufacturing capacity in virtually every Asian country and Schneider will combine that with its stronger branding and global distribution. It hopes the new JV will reach revenues of E100 million annually.
What makes the deal more interesting is that both parties have a put and call option that ensures Gold Peak's eventual exit from the business - by 2008 at the latest.
According to the agreement, Gold Peak will get a minimum of $61.5 million for its remaining 50% stake, although it could get more if at the time of exercise a figure of 14 times EBIT is higher.
Advisers on the deal were ING and PWC, with the latter advising Schneider.