Both sides have entered into “deal exclusivity” for bilateral negotiations before a formal announcement is made in the coming weeks. The deal, once completed, will further help the leveraged 154-year-old construction and real estate conglomerate pare debt and focus on core operations.
Currently housed within the listed Forbes & Co. as a subsidiary, the loss-making Eureka Forbes business will get demerged from its parent as part of an ongoing internal restructuring exercise and sold to Advent after approval by the National Company Law Tribunal (NCLT), said the people cited above.
The current market capitalisation of Forbes & Co. is Rs 5,309.72 crore.
The Pallonji family had bought the business from the Tata Group almost two decades ago. It had mandated Standard Chartered Bank for a formal sale process in late 2019, expecting a Rs 5,000-6,000 crore valuation for the unit. But the Covid pandemic forced it to abandon the process midway and start again at the beginning of the year.
Advent trumped Warburg Pincus and Swedish home appliance maker Electrolux, a former JV partner, in the last lap of the competitive process, said the people cited above. Nomura is advising Advent. In 2015, Advent had teamed up with Temasek of Singapore to buy Crompton Greaves’ consumer business through a similar demerger exercise. After selling chunks of the stock in the public market, Advent sold the last tranche of 5.36% of the company this June through block trades. Last month, Advent also sold its controlling stake in ASK Wealth Management to Blackstone in a billion dollar deal.
Advent and SP Group declined to comment.
Eureka Forbes is among the largest vacuum cleaner and water purifier brands in India, with 20 million customers in 35 countries. Despite an early mover advantage, increasing competition, lack of focus, a heightened cost structure and negligible capital investments resulted in the company losing market share to local and global players in both the mass and premium segments. In FY 21, the business generated Rs 2,857 crore of revenue while notching up a net loss of Rs 78 core. However, the company has managed to shrink this by 76% year-on-year while increasing operating profit sixfold in the same period.
“Having successfully turned around CG Consumer, for Advent this is yet another opportunity to go in and fix it. But the direct sale model, once the largest in the world that helped the key Acquaguard brand, is facing serious headwinds, exacerbated by Covid,” said the CEO of a rival brand.
Eureka Forbes’ attempts at global expansion through an acquisition in Switzerland had boomeranged with the management being forced to restructure the business and write off two significant investments in Europe and Asia.
In March, the Reserve Bank of India-appointed KV Kamath committee approved a one-time restructuring package for Shapoorji Pallonji & Co. Pvt. Ltd’s Rs 10,900 crore debt under the Covid-19 relief framework. SPCPL is the holding company of the 150-year-old SP Group. Under this plan, the group didn’t have to pay interest for a year and no principal for two years, giving it time for disinvestments. The group expects debt to be cut to Rs 3,000-4,000 crore at the end of the year.
The divestment is part of the group’s initiative to strengthen the consolidated balance sheet. ET in its September 8 edition reported that the Mistry family is exploring a sale of their stake in Sterling Wilson Solar, the group’s solar energy engineering, procurement and construction (EPC) arm as part of this restructuring exercise.