M&M offers cash, stock for Punjab Tractors

In a unique offer in the Indian mergers & acquisitions space, Mahindra & Mahindra has proposed a mix of cash and equity for acquisition of the controlling 43.5 per cent stake in Punjab Tractors (PTL). The offer works out to Rs 340 a share, valuing the company at over Rs 2,100 crore.

Its closest rival, Ashok Leyland, has made an all-cash offer of nearly Rs 320 a share. Sources close to the development said the sellers "" private equity fund Actis and the Burman family "" are evaluating both the offers before taking a final decision. The other bidder was Chennai-based Tafe. The three submitted bids on Monday.

Both the offers demanded some guarantees from the seller on certain liabilities of the company, including its outstanding, inventories and legal tussle with Japanese firm Sumitomo.

Actis Managing Director Donald Peck had gone to London yesterday to discuss the matter with the fund's honchos. The decision is expected any time.

The stock market, perhaps, got a whiff of the outcome of the bidding war. The M&M stock today closed 4.47 per cent higher at Rs 757.95 in a falling Bombay market.

The stock reached a day's high of Rs 775. On the other hand, the Ashok Leyland scrip went down by 0.26 per cent to Rs 38.05. The Punjab Tractors stock lost 2.35 per cent to Rs 307.

A successful acquisition of Punjab Tractors will help M&M increase its share in the domestic farm equipment market to 40 per cent from the existing over 30 per cent. Its closest rival, Chennai-based Tafe, controls nearly 23 per cent market share.

Analysts said the growth of M&M's tractor business was expected to taper off, after witnessing robust growth of 32 per cent and 30 per cent in the last two years. A successful acquisition of PTL will thus boost the company's prospects.