MSSL plans to acquire 80% stake in Peguform Group, Germany ::Angel Broking,

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MSSL plans to acquire 80% stake in Peguform Group, Germany
Motherson Sumi Systems (MSSL) along with group firm Samvardhana Motherson Finance
Ltd. plans to acquire 80% stake in Peguform Group, Germany, from Cross Industries AG
through a special purpose vehicle (SPV). Cross Industries would continue to hold the
remaining 20% stake post the acquisition. While the acquisition would be funded by
raising debt, MSSL’s management did not disclose the amount of the deal and expects the
acquisition to be completed by October 2011 subject to regulatory and other approvals.
MSSL would hold 51% stake in SPV, while Samvardhana Motherson Finance Ltd. would
hold the remaining 49%. The deal also includes buying 50% stake in Wethje Carbon
Composite, which is part of Cross Industries.
Peguform Group: Established in 1959, Peguform is headquartered in Germany and is a
leading supplier of differentiated high-quality interior and exterior products for the
automotive and related industries. The group operates internationally and is engaged in
the development, manufacture and distribution of bumper systems, plastic components for
vehicle exteriors, vehicle cockpits, dashboards and vehicle interior trims. The company has
a strong presence in Europe and is one of the market leaders of bumpers in Germany.
Peguform is also the second and third largest supplier of door panels and instrument
panels, respectively, in Germany. Peguform has 22 facilities across the world, including 5
module centres and 17 production plants. The group derives 75–80% of its revenue from
bumper systems and frontend modules and cockpits and interiors. Major customers of the
group include Volkswagon Group, BMW, Porsche, Daimler, General Motors, Fiat and
Renault-Nissan.


We believe Peguform’s acquisition is a major step forward for MSSL in its attempt to 1)
increase the content per car that it provides to customers, 2) further diversify its product
portfolio and 3) provide new technologies. Moreover, the product range of Peguform
provides synergies with the existing products of MSSL. Post the integration of Peguform’s
operations, we expect the global sales to contribute ~80% of the revenue as compared to
~60% in FY2011. While we expect the deal to be positive for the company in the long run,
low operating margins of Peguform Group remain a near-term concern. We await more
details on the deal. The stock is currently under review.