Acquisitions have become quite a habit with the Mahindra & Mahindra group. India's auto major has signed a deal with South Korea's ailing Ssangyong Motor Company, a manufacturer of premium sports and recreational vehicles, to acquire 70% stake for a consideration of $463 million ($378 million in new stock and $85 million in corporate bonds). The deal is expected to create a competitive global SUV player.
Only in May this year, M&M acquired 55.2% stake in electric car manufacturer REVA electric Car Company--a joint venture between the Maini Group and California-based AEV LLC--through a combination of equity purchase from the promoters and a fresh capital infusion of Rs 45 crore ($10 million) into the company. The group also bought out Renualt's stake in a joint venture.
Ssangyong is undergoing a corporate rehabilitation process since February 2009.
M&M president (automotive and farm equipment business) Pawan Goenka, said, in a statement, "together with its financial capability, Mahindra offers competence in sourcing and marketing strategy while Ssangyong has strong capabilities in technology. We will leverage the combined synergies by investing in a new Ssangyong product portfolio to gain momentum in global markets."
The definitive agreement between both parties was signed by Goenka and joint receivers of SYMC, Yooil Lee and Youngtea Park. The deal is expected to be completed by March 2011.
Goenka also indicated that there was an opportunity to introduce premium portfolio of SUVs in the Indian market, offering a growth avenue to Ssangyong. M&M group said, it was keen to protect the Ssangyong brand and its Korean heritage. Also, SYMC will continue to function as an independent entity with Korean management, the statement said.
REUTERS ADDS:-Investors are cautious about the major turnaround at SSangyopng, a SUV maker that has been under court-led restructuring since February 2009 as the global recession hit car sales. "The signing has been already expected, and the question is whether Mahindra would invest in Ssangyong and help the South Korean company launch successful new model line-ups,” said Lee Sang-hyun, an analyst at NH Investment & Securities. It remains to be seen whether Mahindra would be able to rescue the troubled carmaker given its lack of global presence and expertise in SUVs, Sssangyong's stronghold, analysts said.Ssanyong is the maker of Rexton and Kyron SUVs and the Chairman luxury sedan also exports to China, Russia, Europe and the Middle East.