M&M, Romania to revive talks to resolve Tractorul impasse

In an effort to resolve the impasse over the Tractorul Brasov acquisition, Mahindra & Mahindra (M&M) will re-negotiate with the company's owner "� the Romanian government.

"One of the options for M&M is to re-negotiate for the physical assets of Tractorul "� and not the entire company. It means the liabilities of the company will remain with the Romanian government, while M&M will acquire the physical assets," said sources close to M&M. Tractorul has accumulated liabilities of around ¤180 million.

"Re-bidding will never be an option for the company," they added.

Arun Nanda, member of the M&M management, is expected to reach Bucharest during June 10-15 for negotiations with the Romanian officials.

Last week, the sale of Tractorul was suspended by the Romanian government on account of failure to arrive at a mutually acceptable sales formula between the two parties.

M&M was the sole bidder for the company. As part of the bid, M&M had requested the state to write off Tractorul's accumulated liabilities.

The Romanian government had agreed to write off the debt but imposed one condition: M&M, post-acquisition, will have to plough back 50 per cent of the written-off amount (nearly ¤ 90 million or Rs 529.12 crore) into Tractorul's Romanian operations.

"M&M thinks that ¤ 90 million is too large an investment. It can only invest anywhere in the region of ¤ 25-40 million," said the sources.

Moreover, M&M was concerned over the fact that it did not have any guarantee that the Romanian government's promise would have been approved by the Competition Council (of the EU) and would not be subsequently challenged by the European Commission, after Romania becomes a member of the EU next year.

M&M also wanted a full guarantee from the Romanian government on factors required for normal operations of a manufacturing unit like regular water and energy supply, they said.