Schneider Electric acquires Digilink for Rs 500 cr

In a landmark deal inked in Mumbai yesterday, Smartlink Network Systems sold their Digilink
brand to Schneider Electricfor Rs.5, 030 mn, payable by cash. The Digilink brand comprises of the passive networking business including the manufacturing, marketing and sale of structured cabling products, and has been consistently ranked as one of India's fastest growing brands in this business.

According to company reports, Digilink had sales of about Rs.1, 550 mn for the year ended 31st December 2010 and is being sold on a slump sale basis to Schneider as a going concern. The transaction would primarily include the transfer of the “Digilink” brand and trademarks, manufacturing facility at Goa, distribution network and the employees relating to the business. However, the Digilink brand name will remain unchanged. The company has agreed to a non-compete condition for a period of 5 years for the passive networking business, subject to shareholder approval and other customary conditions.

Speaking at the press conference announcing this deal, K. R. Naik, executive chairman of Smartlink said, “We are pleased to enter into this agreement as the transaction recognizes the value of Digilink's pre-eminent position in the structured cabling business including the strengths of the brand, the strong network, support and dedication of our distributors and last but not least, a well qualified, capable and motivated workforce”. Regarding what Smartlink intends to do with the proceeds from this deal, Naik said that the company was in talks for investment and equity-sharing among the company shareholders. However, one of the primary areas of focus will be on building the Digisol brand in India.

For channel partners, this acquisition represents a lot more opportunities, thanks to the expertise of the foreign brand (Schneider) added to it. “While we have been consistently growing at a rate of 15-20% per annum, we expect this figure to reach 20%, with Schneider's partnership.”

Olivier Blum, Country President of Schneider Electric India seemed even more optimistic. “Digilink is the best company for network connectivity in India — an area where we also specialize in. This is a very important move for Schneider and we plan to grow at 30% per year for the next 5 years, and expand the company size by 3-4 times by 2015. In the next 3-6 months, we will expand our products in the export market inAPAC, exporting around 30-40% of our products by 2015,” he said. Currently, Digilink has 3,000 retail outlets all over India.

According to Blum, while the investment fits in well with the expected RoI, the objective is to have India as one of the top four pillars of Schneider Electric in the world. He also remarked that for future acquisitions, Schneider was focused on the energy management space, which would also complement the company's green strategy.

Summarized Blum, “Digilink not only gives us a very strong presence in retail where other Schneider Electric products could be distributed, but also in, SOHO and education segments which is strongly complemented with the enterprise presence of Schneider Electric. Digilink products will be also made available to international markets outside India where Schneider Electric benefit from a strong access to customers.”

berylm@cybermedia.co.in