ANG Auto enters into definitive agreement with Carl Stover to form Joint Venture Companies in USA & India

ANG Auto Ltd has announced that the Company has entered into a definitive agreement with Carl Stover to form joint venture Companies in USA and India. Under this agreement, the joint venture Company in USA shall acquire the running profitable business of manufacturing of auto components at West Virginia plant, USA from Stover Industries Inc. This facility is located on a 5 acre plot with covered area of 30000 sq feet with in-house engineering, machining, fabrication, assembling and welding capability with current sales of approx. US$ 7 million.

This acquisition values the Enterprise Value of Stover Industries Inc. at US$7.7 million and will entail a cash outflow of approximately US$ 2.90 million from the Company.

This joint venture Company in USA will be named as ANG Stover Industries LLC and the Company will hold 70% equity. This will give the Company access to front-end manufacturing operations for existing as well as new customers.

A new subsidiary Company ANG Stover Industries Pvt Ltd will also be set up in India, which will have 70% shareholding from the Company and balance from Carl Stover and his nominees / strategic investors. The Joint Venture Company shall leverage the low cost manufacturing base of this Joint Venture from India. The Company will transfer its existing manufacturing facility at Noida, SEZ (which was commissioned in September, 2006) to the joint venture Company.

The Joint Venture hopes to ramp up supplies to its existing and new customers, providing the customers with low cost proposition along with a front end Local Manufacturing base in USA. Projected Turnover in the new Joint Venture Companies is expected to be in the region of US$ 15 Million to $ 18 Million (Rs 67 Crores to Rs 80 Crores) in the First Year of operations with Sales Projected to reach US 45 Million (Rs 200 Crores appx) in the third year of Operation.

Further the Joint Venture Company is Planning a Capex of Appx. US$ 10 Million in the next 1.5 Years for increasing the Machining / Forging Capacity. ANG expects the margins from the new venture to be in line with the margins currently enjoyed by it.

Source : Equity Bulls

Keywords