The divestiture is part of VEL’s strategy to focus its resources on the high-quality, high-growth primary markets of China, India and the global two-wheeler sector.
The divestiture is part of VEL’s strategy to focus its resources on the high-quality, high-growth primary markets of China, India and the global two-wheeler sector.
Varroc Engineering Ltd (VEL), a leading automotive parts company, has signed a securities purchase agreement (SPA) with French Compagnie Plastic Omnium SE to sell its four-wheel lighting systems businesses in America and Europe for €600 million.
The divestiture is part of VEL’s strategy to focus its resources on the high-quality and high-growth primary markets in China, India and the global two-wheeler sector, the Pune-based company said in a filing.
The transaction will result in VEL divesting its lighting systems operations in the US, Brazil, Mexico, Poland, Czech Republic, Germany, Turkey and Morocco.
VEL will continue to operate its Chinese JV and other international two-wheeler companies in countries such as Italy and Vietnam, as well as global electronics companies in Poland and Romania.
The company maintains its 4-wheel lighting operations in Asia.
“The proposed divestiture of VEL’s four-wheeler lighting systems business in America and Europe will ensure increased shareholder value, sustained growth and the advancement of its R&D facilities and technical capabilities,” the company said.
Tarang Jain, Chairman and Managing Director of Varroc Engineering said, “Our immediate goal is to be future-proof with continued profitable growth in emerging sectors such as electric vehicles and high-tech electronics.”
“Divestment of our automotive lighting operations in America and Europe will be a win-win deal for Varroc and Plastic Omnium,” he said.
“For us, we are creating great value for all of our shareholders, employees and business partners as we plan our next stage of growth in the world’s fastest growing economies and automotive sectors. We will continue to invest in our teams and people as we move into the next phase of our growth,” he added.
Laurent Favre, Chief Executive Officer of Plastic Omnium, said: “Varroc Lighting Systems is a strategic addition to our business that will provide us with an extensive lighting product portfolio, a balanced presence in countries offering the best costs and cross-selling opportunities.”
“Building on our operational excellence, financial strength and long-term vision, we have identified clear levers to bring VLS to world-class operational performance,” he said.
In addition to the identified focus on growth areas, Varroc’s lighting systems and other businesses in India, namely design, manufacture and supply of a wide range of polymer, electro-electronic and metallic components, will continue to have a leading position in these business segments, VEL said.
“With the Indian automotive sector, including 2WD, 3WD and passenger car segment, set to grow at 10-12% CAGR over the next 4-5 years and with emerging alternative technologies in Electric Vehicle (EV) mobility. “Varroc will invest in operations and R&D to enhance shareholder value by creating a robust and financially strong operation that ensures a higher return on investment,” it added.
