Mahindra & Mahindra Ltd (M&M) is buying out its overseas partner Navistar International Corp in two joint ventures, producing and marketing trucks and engines in the country, for Rs 175 crore ($33 million). The deal is triggered by Navistar’s decision to see through a turnaround plan, focusing on the return on invested capital.
The partners had formed two JVs – Mahindra Navistar Automotives Ltd and Mahindra Navistar Engines Pvt Ltd. Post the transaction, both the firms will become wholly owned subsidiaries of M&M. However, the deal will not affect the partners’ existing relationship as Navistar will continue to source components from India and M&M will be providing engineering services to the NYSE-listed firm.
The truck JV was formed back in 2005 and the engines venture was set up two years later. But the initiative did not make any significant dent in the commercial vehicles market, mostly dominated by Tata Motors and Ashok Leyland.
“While the Indian market has not expanded as we expected and industry challenges there continue in the near term, we still see promise in India going forward. But given Navistar’s 2013 priorities, our capital and focus need to be allocated to other business opportunities in the near term,” Troy Clarke, president & CEO of Navistar, said in a statement.
“Since it was established in 2005, Mahindra Navistar Automotives Ltd has created a niche for itself in the Indian commercial vehicle industry. MNAL has set up a world class dealer and service network for trucks, which coupled with the synergies with Mahindra’s dealer network, gives us a significant opportunity to grow our presence in the truck market. M&M is committed to the success of the truck business,” said Pawan Goenka, president, automotive and farm equipment sectors, at M&M.
The deal is expected to be completed after regulatory approvals by early 2013.
(Edited by Sanghamitra Mandal)