Sterlite Technologies S.p.A., a wholly owned subsidiary of Sterlite Technologies Ltd will be acquiring a 100% stake in Metallurgica Bresciana S.p.A. Metallurgica is a global supplier serving European telecom companies for fiber cable solutions and specialised cable solutions for various communication network applications. It designs and manufactures special precision optical fiber cables and specialized copper cables for various communication applications. Metallurgica Bresciana has operations in Italy and China.
The acquisition will be made for a cash consideration of Euro46.67mn, which will be funded through a combination of Euro debt instruments (80%) and internal accruals (20%). On a consolidated level, Sterlite Tech’s Debt/Equity stands at 0.93x as on FY18 end. Metallurgica reported revenue of Euro 48.7mn and net income of Euro4.2mn in CY17. The last two year turnover of the company was Euro39.5mn, Euro41.2mn in CY15 and CY16 respectively. The deal is expected to be closed in the coming two weeks.
We see the acquisition in a positive light as it will help Sterlite Tech to strengthen its presence in the European market through augmentation of its product portfolio. On the valuation side, the acquistion has been done at P/E of ~11xCY17 and EV/EBITDA of 8xCY17 which seems reasonable.
Sterlite Tech provides optical communication products, network and system integration services. In FY18, domestic and international markets contributed 46% and 54% respectively to sales. The company has 45% market share in the domestic Optical Fibre market. Sterlite Technologies (STL), a leading manufacturer of optical products, will gain from government schemes – Digital India and BharatNet, and capacity expansion in optical fibre cable (OFC). – IIFL