Crompton Greaves Consumer to acquire controlling stake in Butterfly Gandhimathi Appliances; Stock skyrockets 8%

23 Feb 2022 , 02:24 PM

Crompton Greaves Consumer Electricals Ltd. (“Crompton”) stock was in the fast lane on Wednesday as investors cheered the company’s agreement to acquire up to 55% stake in Butterfly, a company engaged in the manufacturing, marketing and distribution of kitchen and small domestic appliances (“SDA”), at a price of Rs 1,403.00 per equity share. Also, Crompton signed an agreement for trademarks worth Rs30.38 crore.

Further, Crompton will launch the mandatory open offer to the public shareholders of Butterfly for the acquisition of up to 26% stake at a price of Rs 1,433.90 per equity share. The transaction will be subject to the completion of customary closing conditions. The transaction is expected to be financed through a mix of internal accruals and debt.

Through this acquisition, Crompton takes a transformational step towards its long-term strategic goal of becoming a leading pan-India player in small domestic appliances. As one of the few integrated manufacturers in this space, Butterfly offers immediate scale in kitchen appliances with its diverse portfolio, increasing the share of SDA in Crompton’s offering. This diverse portfolio spans a complementary set of segments, including mixer grinders, stoves and cooktops, tabletop wet grinders, pressure cookers, etc. Acquiring the Trademarks enables the protection of the exclusivity, legacy, and goodwill of the intellectual property of Butterfly as well as consolidation and expansion in complementary segments.

Backed by a ready manufacturing and R&D infrastructure, along with Crompton’s key capabilities and pan-India reach, Butterfly creates a strong opportunity for innovation and expansion in core and adjacent categories and is expected to unlock synergies for both companies.

Shantanu Khosla, Managing Director – Crompton, said, “This acquisition provides concrete support to our long-term vision of becoming a leading pan-India kitchen appliances player. Butterfly’s proven channel and brand strategy will form the base for a stronger SDA business led by mixer grinders. This sets up a platform for a full kitchen play, which will enable a stronger connection with every home. We are excited by the opportunity ahead and wish to serve our valued customers through a larger distribution network and a wider range of competitive and innovative products.”

VM Lakshminarayanan, Chairman – Butterfly, said, “Crompton is a synergistic fit and together, there is great potential for powerful complementarity going forward. We have great respect for Crompton and are happy that this brand which has been so close to us is being entrusted to good hands at the right stage of its future growth journey. We are certain that Butterfly will reach new heights and successes with its instilled values and culture.”

Kotak Investment Banking acted as Financial Advisor and Manager to the Open Offer for Crompton, and Khaitan & Co acted as Legal Advisor for Crompton.

At around 2.21 pm, Crompton was trading at Rs407.45 per piece up by Rs28.85 or 7.6% on BSE. The stock was near the day’s high of Rs408.25 per piece.