Mahindra signs MoU to acquire Ssangyong

Mahindra & Mahindra (M&M) has signed an agreement to acquire a majority stake in beleaguered South Korean auto manufacturer Ssangyong Motor Company (SYMC).

The country’s largest sport utility vehicle (SUV) maker, which was declared as the preferred bidder by SYMC earlier this month, today said it would conduct a detailed due diligence process and also finalise on definitive agreements for the purchase.

Shares of Ssangyong closed 6.9 per cent higher even as the company said it had given M&M the exclusive right for negotiations. SYMC would not involve any third party for takeover-related activities.

M&M scrips also reacted positively and closed 1.02 per cent higher at Rs 624.05, after an intra-day high of Rs 634.5, on the Bombay Stock Exchange.

Speaking to reporters at a press conference in Seoul, M&M Vice-Chairman Anand Mahindra said his company had the financial capacity to acquire a majority stake in Ssangyong to expand its global SUV footprint. Given its cash reserves of about Rs 2,000 crore, M&M was able to acquire the Korean company with its own funds, Mahindra said, according to the Wall Street Journal.

Although the valuation of the deal was not disclosed by either companies, this will be the second-largest outbound deal done by an Indian company in the automotive space in recent years, after Tata Motors bagged Jaguar and Land Rover from Ford Motor Company for $2.3 billion (Rs 11,200 crore) in 2008.

Mahindra expects to wrap up the deal — which, according to street estimates, could cost the company $450-500 million (Rs 1,800-2,300 crore) — by November.

“We are committed to leveraging Ssangyong’s strong competencies in R&D and technology by investing in a new SYMC product portfolio, which will help us gain momentum in global markets. Mahindra’s focus on alternative fuels and electric vehicles with the acquisition of REVA, will further strengthen SYMC’s brand value and take it to new geographies,” said Pawan Goenka, president, automotive and farm sector, M&M.

SYMC, which has a market share of around 14 per cent in the SUV segment in the Korea market, has a strong research and development (R&D) centre and a wide range of competitive products in the pipeline.

“M&M is committed to nurturing the SYMC brand in global markets, while preserving its Korean heritage. It is intended that SYMC will continue to function as an independent entity with Korean management. The acquisition will offer financial stability to SYMC, while making M&M the largest Indian employer in Korea,” said M&M in a release.

M&M is targeting the west European, Russian, Latin American and the US markets through the acquisition. SYMC had unsuccessfully tried in the past to enter the US market, the biggest market for premium SUVs. M&M is independently pursuing its plans to enter the US market for its own range of passenger vehicles.

SYMC has been under a court-led bankruptcy protection since early last year, following cash exhaustion due to falling demand for its products. However, during January-June sales of SYMC grew nearly threefold to 36,512 units, compared to 13,020 units in the same period last year.