German carmaker Daimler is selling its entire stake in India’s Tata Motors for up to $429 million, sources familiar with the matter said on Monday.
Daimler was offering 25.6 million shares in India’s largest vehicle maker at 737.4 rupees to 761.3 rupees each, a discount of 4 percent to 7 percent below the stock’s Monday close of 796.75 rupees, sources said. The shares, which represent a 5.34 percent stake in the automobile firm, will be sold in the open market in block deals, a source with knowledge of the matter said. "The book is just being built,” he said.
Daimler owns 5.34 percent of Tata Motors’ ordinary shares and 4.71 percent on a fully diluted basis. Media reports in India had earlier speculated that the German carmaker was looking to exit its long-held stake in Tata Motors.
Last month Daimler scrapped its dividend for the first time in 14 years after it swung to a worse than expected 2009 net loss, and analysts said that rebuilding its western markets would be at the forefront of the company’s strategy.
“We certainly now have as a priority turning around the mature markets and then China. This is certainly now a higher priority for Daimler than India,” said Juergen Pieper at Metzler Equities.
Analysts also noted that there had been no cooperation or joint ventures between the two firms in recent years, and that the holding was a financial one for Daimler. “Certainly the intention must have been there that there is some degree of cooperation in the long-run,” said Pieper.
Tata Motors initially started its automotive operations by manufacturing trucks in collaboration with Daimler in 1954. Citigroup was handling the share sale, the sources said. Tata makes the world’s cheapest car, the Nano, and also owns the UK-based Jaguar and Land Rover luxury brands.
Shares in Tata Motors have risen 19 percent since February 26 when the company posted a consolidated net profit for the second straight quarter as sales from its Jaguar and Land Rover unit recovered.
Shares in Tata Motors, which closed before the news of the share sale, ended 0.18 percent higher on Monday, while Daimler shares closed up 0.3 percent, marginally outpacing the market.