Mumbai: Larsen & Toubro has closed the strategic divestment of its electrical and automation business to Schneider Electric, a global player in energy management and automation.
The significant and complex divestment deal announced in May 2018 has been completed after receiving the requisite regulatory approvals and fulfillment of necessary conditions.
About 5,000 employees of L&T's electrical and automation business will become part of Schneider Electric. Its manufacturing facilities in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru in India and related subsidiaries in UAE, Kuwait, Malaysia and Indonesia are also being transferred to Schneider Electric.
In view of the pending local approvals, the subsidiary in Saudi Arabia, L&T Electrical and Automation Saudi Arabia Company Ltd will be transferred to Schneider after the requisite regulatory approvals are in place.
The divestment is in line with L&T's stated goal of unlocking value for future growth. L&T said it continuously evaluates its business portfolio and takes capital allocation decisions from a long-term perspective.
"The closure of divestment of the electrical and automation business is a key milestone in our stated long-term strategy. The challenge was to carve out a business of this scale with minimum disruption to the sprawling customer base and do it all amid the constraints of a pandemic," said Group Chairman A M Naik.
"We truly believe that this deal with Schneider Electric is a win-win for our employees, business partners, and shareholders," he said.
CEO and Managing Director S N Subrahmanyan said the all-cash deal will help the company create a much stronger balance sheet, thereby creating long-term value opportunities for stakeholders by focusing on key aspects of business.
"The deal was a complex M&A transaction involving slump sale of the domestic business and share purchase transfer. This is in sync with our strategy to look at L&T in broadly three areas -- EPC construction and projects, manufacturing, and defence and services," he said.
Shardul Amarchand Mangaldas Legal Advisors, Ernst & Young LLP and Arpwood Capital acted as advisors to L&T on this transaction.