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Videocon and Thomson SA in circular deal for picture tube businessnews
Our Corporate Bureau
29 June 2005

New Delhi: The Videocon group has acquired the entire picture tube manufacturing operations of Thomson SA, for €240 million. With this deal, Videocon will own Thomson''s three manufacturing facilities in Poland, Mexico and China. 19,000,000 units of colour picture tubes along with 4,000,000 pieces colour picture tube glass, per annum.

The purchase agreement also allows Videocon to take over the R&D facilities at various places in Europe and China and access to a large resource of the patents and IPRS relating to technologies in colour picture tube segment.

Except one facility in China, which has the local Chinese government as a minority shareholder, all the business interests are owned by Thomson.

Videocon Group has drawn out an ambitious plan to improve these facilities both qualitatively as well as quantitatively by adding latest developments like slim tube, plasma, LCD and other flat panel display lines into business interests to be acquired from Thomson.

Videocon and Thomson executed the agreement in Delhi where finance minister P Chidambaram and Dominique Girard the French Ambassador. Videocon group, which comprises of four mainline listed companies has managed this acquisition through a complex deal with Thomson, which in the final analysis, will not involve any net outgo of funds.

The acquisition of Thomson''s manufacturing units has been made through an offshore entity of Videocon group in which other group companies like Videocon Communication, Videocon Appliances and Videocon International hold 19 per cent equity each, totalling 57 per cent. Videocon Industries has a 25-per cent interest in the oil exploration from the Ravva field, which yields a net cash flow of more than Rs 400 crore ($90 million)

As part of the deal, Thomson will receive €240 million for the picture tube business from Videocon. At the same time, Thomson will invest the same amount in two listed Videocon companies - €225 million or about Rs1,200 crore in Videocon Industries, which is mainly active in the energy sector, at $10 per share and €15 million or Rs80 crore in Videocon International.

Thomson will thus invest €240 million in Videocon group companies, exactly the same amount as will be realised by the sale of its business. With this acquisition, Videocon Group will emerge as among the largest global manufacturers of colour picture tubes with the tube glass along. The company already has business interests in manufacture of 17-million pieces per annum colour picture tube glass facility in India. This is being expanded to 24-million pieces per annum. Videocon also has business alliances with BPL and JCT , which have a combined capacity of 5-million colour picture tubes per annum.

After integration of the colour picture tube business from Thomson SA with its Indian business, the total turnover of the Videocon Group is expected to be Rs17,500 crore ($4 billion) with more than Rs.8,700 crore ($2 billion) coming from global operations.

The aggregate investments envisaged for all these would be over $500 million, in one or more tranches. The Group plans to fund this by accessing domestic / international debt / equity markets.

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Videocon and Thomson SA in circular deal for picture tube business