EuroGroup Laminations, India's stoppage blows up deal with FountainVest

India's approval is lacking. Chinese private equity firm FountainVest cancelled an agreement to buy a major stake in EuroGroup Laminations (Egla) from Ems, the main shareholder of the Italia-based electric motor component manufacturer, because it failed to obtain regulatory approval in India. At the opening of Piazza Affari, Eurogroup's shares were not traded, as they were expected to fall about 50 per cent. Towards the middle of the session, however, EuroGroup Laminations' shares managed to make a price and started trading with an even worse decline than expected, -56.5%, and then closed at the end of the day at -58.9% or EUR 1.46 per share.

This morning, Euro Management Services (Ems) and Ferrum (an investment vehicle owned by FountainVest) said in a joint note that the compliance discussions with the Indian authorities had been unsuccessful and that no alternative solution had been found, and that they had therefore cancelled the deal due to 'complexities that arose during the process'. Eurogroup's shares were not traded at the opening of the market as they were expected to fall by about 50 per cent.

Last year, Eurogroup agreed to sell its 45.7% stake in the electric motor component supplier to FountainVest in a deal that included a takeover offer to delist the Italian company. The deal was conditional on obtaining regulatory approvals in all relevant markets, including India. Ems and FountainVest then initiated and conducted negotiations to identify alternative solutions that could also allow the transaction to be completed in compliance with Indian regulations while minimising the impact on the shared business plan, including the possibility of a spin-off of the group's Indian subsidiary. However, these negotiations were unsuccessful. In light of this, Ems and FountainVest took note of the unfeasibility of the condition precedent relating to obtaining the authorisation for foreign direct investment in India and the consequent impossibility of proceeding with the entire transaction.

According to a document seen by Reuters in January, the Italia government had already authorised the deal by imposing unspecified conditions under the so-called golden power rules, designed to protect strategic assets. Egla said - in a separate press release - that the termination of the deal does not affect its industrial or financial prospects

The deal had been announced last July, when Ems (Euro Management Services) agreed to sell its 45.7% stake in EuroGroup Laminations to an investment vehicle owned by the Hong Kong-based fund for EUR 3.85 per share. Under the terms of the agreement, Ems would then reinvest 50% of the sale proceeds in a new holding company formed with FountainVest to own EuroGroup.
FountainVest had also concluded an agreement to acquire Tikehau Capital's 7.9% stake in the Italia group for the same price, meaning that at the closing of the deal, which was scheduled for the first half of 2026, the new holding company would hold 55.3% of the voting share capital. Subsequently, according to plans, a takeover bid would be launched on the remaining shares, again at EUR 3.85, for a valuation of the company of EUR 626 million, with the aim of delisting it. On the day the operation was announced, the EuroGroup Laminations share price had gained 52.62%, reaching EUR 3.56 per share and aligning itself with the proposed purchase price. Until the stop came.