Larsen & Toubro announced the long-awaited closing of its deal to sell its electrical and automation business to France headquartered-Schneider Electric after the two companies announced a deal worth Rs 14,000 crore in May 2018. 

The COVID-19 pandemic has disrupted the closing of this deal which was expected to be finalized in early 2020. With this, all-cash deal, the $ 21 billion Indian engineering major has exited its only products business in order to focus on its core competencies in construction and engineering and the high margin services business.

L&T Group Chairman AM Naik said the deal was a "win-win situation" for the company's employees, business partners, and shareholders.

"The closing of the E&A business is a milestone in our stated long-term strategy. The challenge has been to create a company of this size, with minimal disruption to the expanding customer base, and to do all of this amidst the constraints of the pandemic. "We believe that Schneider Electric is the right partner for business growth that L&T had nurtured and grown over decades,” Naik said in a statement.

Schneider Electric said the acquisition is part of its strategy to expand its presence in India. The company also said that it appointed Anil Choudhury, currently regional president and CEO of Schneider Electric India, as CEO of Schneider Electric India Private, which is 65% owned by Schneider Electric, and the remainder of global investment firm Temasek.

"This major strategic move will make India the third-largest Schneider Electric company in the world, and one of Schneider's top four global centers for research, development, and manufacturing. We will also continue to grow our already significant exports from our Indian factories. "said Jean Jean-Pascal Tricoire, Chairman & CEO, Schneider Electric."

L&T continually assesses its business portfolio from a long-term capital allocation perspective. In the past, it exited many non-essential businesses, such as gas pump vending machines and cement companies, and abandoned some joint ventures. More recently, it renounced its participation in port, insurance, and highway concessions. 

The company said the E&A sale transaction was complex in nature, but received all required regulatory approvals and met all necessary conditions. 

"This cash arrangement will help us create a much stronger balance sheet, thereby creating valuable long-term opportunities for our shareholders by focusing on key aspects of the business," said SN Subrahmanyan, chief executive officer, and managing director.

L & T's E&A division has provided a wide range of low and medium voltage switchgear, electrical systems, building automation solutions, industries, energy management systems, metering solutions, projects, and business services. Schneider Electric will use relevant brand badges for a specified period to take advantage of brand popularity. 

Schneider Electric will acquire 5,000 employees and L&T’s manufacturing facilities in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore, Mysore, and related subsidiaries in the United Arab Emirates, Kuwait, Malaysia, and Indonesia.

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