GMM Pfaudler surges on acquiring controlling stake in parent group

GMM Pfaudler jumped 5.37% to Rs 6253.05 after the company said it will acquire majority stake in the global business of Pfaudler Group.

GMM Pfaudler announced the signing of definitive agreements to acquire a majority stake in the global business of its parent, the Pfaudler Group from the private equity firm Deutsche Beteiligungs AG Fund VI (DBAG).

As per the agreements, GMM (directly and through its subsidiary Mavag AG) and the Patel family will acquire, a 54% and 26% equity stake respectively in the Pfaudler Group. DBAG will continue to retain the balance 20% stake. The consideration for the 54% stake acquired by GMM, which is expected to be around $27.4 million, will be funded by the company through a mix of internal accruals and debt.

Pursuant to the acquisition, GMM shall become the ultimate holding company with the entire business of Pfaudler being consolidated into the company. The company will have a consolidated revenue of Rs 2000 crore and EBITDA of approximately Rs 250 crore. GMM will become the world leader in corrosion-resistance technologies, systems and services with 12 manufacturing facilities across 8 countries and 4 continents and employing around 1,500 people.

Tarak Patel, managing director, GMM said, "Being an integral part of Pfaudler for more than 3 decades, not only do we understand the business very well but have also managed to build a collaborative relationship with the different Pfaudler units around the world. This transaction is unique from the stand point that it combines the strengths of three very different partners - promoter family, professional management and private Equity which we believe will help extract synergies and create vaiue for all stakeholders. On a personal level and as the third generation of a family business that began in 1963 it is a moment of great pride to see GMM enter the global stage."

Thomas Kehl, CEO, Pfaudler said, "Over the last few years Pfaudler has spent significant capex in modernizing it's manufacturing facilities across the globe. This transaction will bring synergies across multiple levels, the combined business will now be in a position to leverage GMM's highly successful lean-production model and low cost to improve both revenue and profitability. In addition, our order book remains strong on the back of robust demand driven by the chemical and pharmaceutical industries. Together with the GMM management and DBAG, who we have worked closely with over the last 5 years we expect to complete a seamless integration and hit the ground running."

Subject to the satisfaction of certain closing conditions and regulatory approvals, the transaction is expected to close in November 2020.

GMM Pfaudler is a supplier of process equipment to the pharmaceutical and chemical industries. The company has a diversified product portfolio which includes mixing systems, filtration & drying equipment, engineered systems and heavy engineering equipment.

The company reported 8.5% rise in consolidated net profit to Rs 19.19 crore on 2.8% increase in net sales to Rs 154.43 crore in Q1 June 2020 over Q1 June 2019. EBITDA margin fell to 17.8% as on 30 June 2020 from 18.4% as on 30 June 2019.

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