Tatas seal Daewoo deal for Rs 465cr

Tata Motors is buying Daewoo Commercial Vehicle for $102 million (Rs 465 crore).

"We will put in half the money by way of equity and the other half will come from banks as a loan to Daewoo Commercial Vehicle," Praveen Kadle, executive director, finance and corporate affairs, Tata Motors, said.

The acquisition would give Tata Motors the perpetual and exclusive rights to use the Daewoo trademark for Daewoo Commercial Vehicle's trucks in South Korea and other overseas markets, Tata Motors said in the statement.

The acquisition is, however, subject to the approval of an amended reorganisation plan for the company, which reflects the terms of the investment agreement, by its creditors and shareholders and the Incheon District Court. The approval is expected to come through in March 2004.

The agreement marks the completion of due diligence by Tata Motors, as per the memorandum of understanding signed between the two companies on November 5, 2003.

It also follows a successful collective bargaining agreement between the management and the union of Daewoo Commercial Vehicle, recognising the change in its ownership.

The investment agreement was signed by Ravi Kant, executive director (commercial vehicle business unit), and Kadle on behalf of Tata Motors, and by Chae Kwang-ok, court receiver of Daewoo Commercial Vehicle.

Ratan Tata, chairman of the Tata Group, said in a statement, "I am confident that both companies will drive considerable benefits from this agreement."

Chae Kwang-ok said, "With this deal, Daewoo Commercial is expected to have product competitiveness after strengthening research and development and after-sales services."

Shares in Tata Motors ended up 0.8 per cent at their highest close in a decade of Rs 563.25 on the Bombay Stock Exchange.

Daewoo Commercial Vehicle, spun off from Daewoo Motor in November 2002, is the second-largest maker of heavy commercial vehicles in South Korea and has a market share of 26 per cent.

Daewoo also produces tractors and other utility vehicles with an annual capacity of 20,000 vehicles. The firm, which has 800 employees, has been under court protection while its parent Daewoo Motor, sold most of its passenger car operations to General Motors Corp and partners in 2002.

In the driver's seat

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• Acquisition financed equally through Tata Motors' equity in Daewoo Commercial Vehicle and direct borrowings by Daewoo Commercial
• Buyout gives Tata Motors exclusive rights to use Daewoo trademarks in Korea and overseas markets
• Other approvals are expected by March 2004