Motherson Sumi’s Bombardier Transportation acquisition: Another feather in its cap

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UK-based Motherson Rolling Stock Systems GB (MRSS) has signed a definitive agreement to acquire Bombardier Transportation (Rolling Stock) UK. MRSS is a wholly-owned indirect subsidiary of Motherson Sumi Systems via the PKC Group.
The target

Bombardier Transportation is a leading mobility solution provider in the rail space catering to over 60 countries. It has a complete spectrum of mobility solutions, ranging from trains to sub-systems and signalling to complete turnkey transport systems, e-mobility technology and data-driven maintenance services. It is into production and installation of electrical components and systems for applications in the rail industry. It is into manufacturing of wiring harnesses, panel and cabinet build and electromechanical assemblies in Derby, UK.
The deal

In terms of financials, Bombardier had revenue of 36 million pound at the end of CY18. The acquisition has been at a total consideration of 10.87 million pounds on a debt-free and cash-free basis. The transaction values Bombardier at 0.3 times 2018 enterprise value-to-sales basis, a good deal for MSSL.
Benefits to MSSL

In line with its strategy and target to achieve Vision 2020 ($18 billion in revenue, 40 percent consolidated return on equity, 3Cx15: no country, customer or component should be more than 15 percent of total revenue and 40 percent of consolidated profit to be paid as dividend), MSSL has moved a step closer with this acquisition. This is the third acquisition after formulating Vision 2020.

Bombardier’s acquisition would provide a lot of synergies with the PKC business. The acquisition would help MSSL through PKC to move up the value chain beyond supplying wiring harness to the commercial vehicle segment. This would also help strengthen its position in wiring harness opportunities in the rolling stock segment.

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