KEC International eyes more buyouts in the US

KEC International, India’s largest transmission tower manufacturer, would look at more buys in the US, said chairman Harsh Goenka on Tuesday, after signing an agreement to acquire 100% of Houston, Texas-based SAE Towers Holdings LLC for $95 million, or Rs445 crore.

The deal is expected to be completed in a month.

“We have been looking for acquisitions in the US for the past four years but couldn’t get the right valuations which are good now,” Goenka said, adding that buys would not be restricted just to tower manufacturing companies. In addition to making towers, KEC produces cables and takes up turnkey contracts in transmission & distribution while SAE is just a manufacturer.
Sagent Advisors and Daiwa Capital Markets India advised KEC on the deal.

Ramesh Chandak, managing director & chief exectuive, said KEC, part of the $3.7 billion RPG group, would fund the acquisition through debt and internal accruals. He said that the company was still working on the details on the debt-raising. SAE, owned by US private equity firm ACON Investments, currently has debt of $16 million.

The company, the biggest steel lattice transmission tower firm in the Americas, has an annual production capacity of 100,000 tonnes at its two facilities in Brazil and Mexico. KEC’s capacity is 210,000 tonnes including 60,000 tonnes of outsourced capacity.

“We are not looking at moving any of the capacities to India because there are huge opportunities in the US and Latin America,” Chandak said. SAE’s present capacity utilisation is 60% and Chandak said it would increase to 100% in three years.  SAE posted a topline and operating profit of $120 million and $10 million, respectively in 2009, which is expected to rise to $137 million and $19 million this year. SAE has an order backlog of $126 million.

The acquisition gives KEC access to new products such as, among others, transmission poles and to the North and Latin American markets.