KEC buys US firm SAE Tower for Rs 446 crore

Source: Rupesh Subhash Janve : FC:Sep 07 2010


After a two-year break in the US, the Rs 17,000 crore RPG group has finalised acquisition of America’s largest manufacturer of steel towers used in power transmission. KEC International, an RPG group company, has inked a deal to acquire SAE Towers Holdings from private equity firm ACON Investments for $95 million (approximately Rs 446.5 crore). The deal is a cash-free and debt-free one and will give KEC access to the US, Canada and Latin American markets.



SAE is a profitable firm with an estimated turnover of $137 million and an EBITDA of $19 million and an EBITDA margin of 14 per cent as compared to 9-10 per cent for KEC.



“We see the US as a huge opportunity for us as valuations are good and the business is flat. So we will look at more acquisitions in that market across sectors that the group operates in including IT,” said Harsh Goenka, chairman, RPG Enterprises.



The acquisition of SAE is expected to close by the end of this month on a cash-free, debt-free basis, and will be EPS accretive from 2010-11, the company said in a statement. Since SAE has approximately $16 million of debt on its balance sheet, KEC will effectively pay $79 million (Rs 353.46 crore).



“The deal will strengthen KEC's foothold in the markets of North America and Latin America where transmission and distribution spends are increasing,” Goenka, who is also the chairman of KEC International, told reporters in Mumbai on Tuesday. RPG group is also looking at Europe for acquisitions across the businesses.



Meanwhile, KEC expects to raise debt from the international market to fund the acquisition. “The acquisition will be through a combination of internal accruals and equity. Since interest rates are lower in the international market than in the domestic market, we may go for fund raising from the international market,” Ramesh Chandak, MD and CEO of KEC, said.



A top KEC officials said that the company had a free cash flow of around Rs 70 crore last year. The figure is expected to be higher this year. “We don’t think we’ll have any issues raising debt in the international markets,” a KEC official said.