Crompton Greaves to buy Butterfly Gandhimathi in ₹2,076 crore deal

Crompton Greaves Consumer Electricals said it will acquire a controlling stake in Butterfly Gandhimathi Appliances as it looks to become a leading player in the small domestic appliances segment.

The Mumbai-based consumer durables company signed agreements with promoters of kitchen appliance maker Butterfly Gandhimathi to acquire up to 55% stake at ₹1,403 per share for ₹1,379.68 crore, according to an exchange filing. Crompton Greaves said it will also purchase certain Butterfly trademarks for ₹30.38 crore.

The transaction, subject to completion of customary closing conditions, is expected to be financed through a mix of internal accruals and debt.

The company said it will also launch the mandatory open offer to the public shareholders of Butterfly for the acquisition of up to 26% stake at a price of ₹1,433.90 per equity share, aggregating up to ₹666.57 crore. The total deal value stands at ₹2,076.63 crore.

Crompton said the deal offers immediate scale in kitchen appliances with Butterfly’s diverse portfolio.

Chennai-based Butterfly makes mixer grinders, table top wet grinders, pressure cookers, stainless steel vacuum flasks, LPG stoves and non-stick cookware. It is among the top 3 pan-India kitchen and small domestic appliances players, the filing said.

“Butterfly's complementary product portfolio coupled with scale and channel synergies will drive robust revenue growth and profitability,” it said, adding that the appliance makers manufacturing and R&D infrastructure creates a strong opportunity for innovation and expansion in core and adjacent categories and is expected to unlock synergies for both companies.

This acquisition provides concrete support to our long-term vision of becoming a leading pan-India kitchen appliances player, said Shantanu Khosla, managing director at Crompton. “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 connect with every home.”

Incorporated in 1986, Butterfly reported revenues of ₹870 crore with EBITDA of ₹80 crore in FY21. In the first nine months of FY22, the company clocked ₹806 crore revenue with EBITDA of ₹75 crore.

With the acquisition, Crompton will consolidate its position in southern states of the country. “Butterfly is a strong brand in South India, and this step will provide an opportunity for the Butterfly brand to achieve pan-India reach,” said VM Lakshminarayanan, chairman at Butterfly.

Shares of Crompton Greaves jumped over 7% to ₹407.5 apiece on BSE. ICICI Securities has a ‘buy’ rating on the stock with a target price of ₹504, a potential upside of about 30%.

“With the acquisition of Butterfly, the company will have access to two strong brands which will relatively de-risk the business model. Assuming 5% synergy benefits by FY24, the acquisition will lead to earnings accretion. There will be synergies in raw material sourcing, distribution, media sourcing and distribution,” the brokerage said.

Meanwhile, shares of Butterfly Gandhimathi Appliances hit a record high of ₹1,419 in the intra-day trade on Wednesday.