The acquisition of MSI (Belgium) by RSB Transmissions is expected to provide synergy benefits to both the companies, reports Huned Contractor

RSB Transmissions, which designs and manufactures aggregates used by the automotive, construction and farm equipment sectors, has acquired 70 per cent stake of the Belgium-based construction equipment aggregate manufacturer MSI (Mechanical Supplies International) for an undisclosed sum. RSB Transmissions is a fast-growing engineering and technology organisation with ten state-of-the-art manufacturing plants spread over seven locations in India and the US. The acquisition, according to a press release issued by the company, was carried out through its Netherlands-based European SPV, RSB Europe BV.

The Belgian company, MSI NV, situated in the city of Tessenderlo, presently manufactures heavy fabrication aggregates for excavators, off-highway machines and windmills, which are similar to the products of RSB manufactured in its Jamshedpur, Dharwad and Chennai plants. Both MSI and RSB have identical technology, process and machines. Caterpillar Belgium and Caterpillar France are the major customers of MSI, just as Caterpillar India is one of the prime customers of RSB. For Caterpillar Belgium and France, MSI is a preferred and certified (SQEP Bronze) supplier. Incidentally, Caterpillar, Belgium is the largest Caterpillar operation outside the US. Pre-recession, in 2008, MSI recorded a turnover of Euro 21 million. It has the innate capacity and is projected to climb to Euro 28 million by 2012 without any additional investment.

According to R K Behra, Chairman, RSB Transmissions, “The acquisition of a majority stake in MSI will lead to immense synergy benefits to both RSB and MSI.” RSB, which exports substantial heavy fabrications to Europe, can now have a front-end presence in Europe to consolidate and grow its exports. European customers will have greater comfort to do business with RSB. Moreover, heavy fabrications, which were otherwise logistically impossible to ferry from India to Europe, can now be offered by the RSB – MSI combine. The sub-assemblies will be manufactured in India and the final assembly and finishing work can be done at MSI. Thus, more value-added products can be offered by RSB.

“RSB has already commenced exports to Terex Europe and with this association the company expects to deepen its engagement with Terex. In this manner the export business is set to grow. The RSB-MSI association will also be leveraged by MSI to secure additional business from Caterpillar with whom both RSB and MSI are otherwise engaged individually. Likewise, for some of the products presently manufactured by MSI, certain sub-assemblies can be outsourced to India to derive cost benefits. The RSB-MSI combine will be able to leverage each other’s capabilities and thus add new customers to their respective businesses both in the European and India geography. This coming together of RSB and MSI is thus beneficial to both to expand their topline and improve their bottomline,”.

Incidentally, both RSB and MSI have DIN 18 800-7, Class 7 welding qualification and are thus advantageously positioned for the global heavy fabrication business. It may be recalled that in November 2006, RSB Transmissions had acquired the Michigan-based Miller Brothers Manufacturing – since rechristened RSB NA – a speciality auto transmission component manufacturing company. The group has successfully managed this acquisition and hence even during the last two years of deep recession RSB NA has been both PBT and PAT positive.

In the closely held RSB Transmission, IL&FS Investment Managers Limited (IIML) and Evolvence Limited are minority PE investors. RSB Transmissions had a turnover of Rs 750 crore (USD 167 million) in FY10 and is aiming to hit Rs 1,000 crore (USD 222 million) in FY 2010-11. It is also understood from reliable sources that RSB Transmissions is planning to go for an IPO sometime in the last quarter of 2010 to fund its ambitious growth plans.