Continental Engines to buy ATK Vege for euro 10 mn

Gurgaon-based auto component maker Continental Engines (CEL) will acquire US-based ATK Vege for ¤10 million. ATK Vege is an engine re-manufacturing company with an annual turnover of more than Rs 300 crore.

This proposed acquisition follows the buyout of Europe-based Vege Motors (by CEL), a group of ATK Vege, in mid 2005. CEL had the call option of acquiring ATK Vege, the US operation arm of Vege Motors.

"We are in the finalisation stage of acquisition of ATK Vege. The deal is expected to be closed in the next few months. An acquisition in the US is going to be a good launch pad for the company in that market," said a senior CEL official.

The turnaround of Vege Europe in six months of acquisition has encouraged CEL to acquire ATK Vege, said officials. VE had been losing close to ¤400,000 every month when it was taken over by CEL.

Post-acquisition, CEL intends to integrate and restructure the manufacturing activities of Vege Europe and ATK Vege with the company.

The restructuring has already begun with Vege Europe intending to shift nearly 40 per cent of its total operations to a new export-oriented unit (EoU) at Bhiwadi near Delhi, according to a Vege Europe official.

Vege is expected to post a turnover of euro 50 mn by 2007, of which 40 per cent is expected to be contributed from Indian export oriented plant. Vege Europe also plans to add products such as automatic transmissions, turbo charger, air conditioner, pump, cylinder head and gear box.

CEL is a wholly owned subsidiary of Bakshi family, which is also into construction and real estate business.

It makes parts such as cylinder head, crank case, engine block and manifolds at Bhiwadi. The company is exporting to assembly lines of car makers such as Peugeot, Nissan and Kia in Iran.

Piaggio Motorcycles, VM Motori and Deutz are its other clients. Its Indian clients include Hindustan Motors, Mahindra & Mahindra, Eicher, Greaves, LG and Swaraj Mazda.

In 2005, Continental posted a net profit of Rs 34 crore on sales of Rs 125 crore. The company's financial results for the year ended March 2006 has been delayed by another couple of months.