Sandvik buys Kennametal arm for Rs 65 crore

Kennametal Widia has divested its mining and construction tools business to Sandvik Smith AB for Rs 65 crore in an all-cash transaction.

With this acquisition, Sandvik Smith AB will enter the country through a wholly owned subsidiary.

According to Kennametal Widia, this decision was taken on account of the fact that the nature of the business involves a downstream application of the company's core competency in hard metal applications.

News of the deal sent the company's shares up 9.99 percent to Rs 249.40 on the Bombay Stock Exchange in early trades. The stock finally closed the day at Rs 240.45 on the BSE.

Globally too, Kennametal's focus is on the supply of hard metal and associated components. Announcing this decision, Kumar Kanetkar, managing director, Kennametal Widia, said the decision was taken by the board to realign the Indian company around its primary mission of serving Indian manufacturing.

The other three businesses of the company machine tools, metal-cutting tools and metal forming tools will, however, will remain unchanged.

The company will also now look to relevant hard metal tools and consumables that are available in the Kennametal portfolio in participating in the infrastructure construction that is underway in the country.

Orjan Persson, president of Sandvik Smith AB, which is a joint venture between Sandvik of Sweden and Smith International of the US, said with this strategic investment, it will give access to the facility that the business has at Patancheru in Andhra Pradesh.

Sandvik Smith is in the business of roller cone bits for mining and construction. Sandvik Smith AB has also signed an agreement for supplies of hard metal products for the manufacturing facility in India.

Kennametal, the world's second-largest metalworking company, acquired its 88 percent stake in the Indian venture as part of its global acquisition of Widia, which it bought in May 2002 from Milacron Inc.