Mahindra & Mahindra, India’s largest SUV maker has said that its acquisition of South Korean company Ssangyong Motor would help it emerge as a global force in the SUV market.
“Korea is one of the world’s leading centres of automotive excellence and Ssangyong brings with it a rich legacy of R&D and innovation...The synergies between both the brands, which share a similar heritage, will make us a combined force to reckon with in the global SUV space,” M&M vice-chairman and managing director Anand Mahindra said after signing an MoU in Seoul to acquire ailing Ssangyong.
The MoU will be followed by a detailed due diligence process and finalisation of definite agreements, M&M said in the statement, without disclosing the sum that it had agreed to pay to emerge as the preferred bidder for Ssangyong.
Analysts pegged that the takeover cost could be around $500 mn. Ssangyong has a debt of $640 mn. M&M had earlier said that it would acquire a debt-free company, when it completes the acquisition of Ssangyong by this year-end. M&M has cash reserves of over $500 mn. It has a debt-equity ratio of 0.3 per cent, among the lowest in the industry.
Pawan Goenka, the company’s president, automotive and farm sector said, “M&M’s focus on alternative fuels and electric vehicles will further strengthen Ssangyong’s brand value and will take it to new geographies.”
Ssangyong is South Korea’s smallest car maker, which makes low-priced but robust SUVs like the Rexton, Kyron and Actyon. It also makes sedans. It struggled to stay afloat since a violent strike over job cuts disrupted production for almost 80 days last year and has been undergoing a court-led restructuring from 2009.
China’s SAIC Motor holds a 10 per cent stake while 70 per cent is held by creditors, led by state-owned Korea Development Bank. M&M has said that it will function under a Korean management. Rothschild and Samsung Securities are advising M&M on the deal.